Transocean Inc. (RIG), the world's largest offshore driller, said Monday it would buy smaller rival GlobalSantaFe Corp. (GSF), creating a $53 billion company with a presence in ultra-deepwater and deepwater drilling and additional growth from new rigs.

The oil services sector has been rife with rumors of link-ups in recent months, fueled by speculation that companies would seek mergers to gain market share and take advantage of the huge spending increases in the energy sector.

"This is the type of transaction shareholders have been clamoring for," said Mark Urness, an analyst with Calyon Securities.

Under the terms of the deal, Transocean shareholders will receive $33.03 in cash and 0.6996 shares of the combined company for each share of Transocean they own. GlobalSantaFe shareholders will receive $22.46 in cash and 0.4757 shares of the combined company for each share of GlobalSantaFe they own.

Shareholders of both companies will receive a total of $15 billion in cash.

The combined current revenue backlog of $33 billion, together with the greater financial strength of the combined company, will enable a $15 billion recapitalization. The combined company will use its first two years of free cash flow to reduce debt.

"They have managed to dividend out a portion of their backlogs," Urness said. Combined, the companies have a backlog of about $30 billion, he said.

The combined company, which will be known as Transocean Inc., will offices in Houston and trade on the New York Stock Exchange with the symbol "RIG." Transocean Chief Executive Robert Long will continue in that role after the merger. GlobalSantaFe President and CEO Jon Marshall will serve as Transocean's president and chief operating officer.