Merger to Form Largest Offshore Driller

Falcon Drilling Co. and Reading & Bates Corp. agreed to merge in a $2.5-billion stock transaction, a move that would create a company that operates the world’s largest fleet of offshore oil rigs. The planned merger comes just as oil exploration is increasing in the Gulf of Mexico. The combined company, to be renamed R&B; Falcon Corp., would be a dominant player in the rental of offshore drilling rigs, a market that has exploded because of technological advances that made it economical to drill in deeper waters. Reading & Bates shares gained $2.50 to close at $33.50. Falcon advanced 63 cents to close at $58.50. Both trade on the NYSE. Falcon nearly doubled its revenue in the first quarter of this year, compared with last year. Shareholders would receive 1 share of R&B; Falcon common stock for each share of Falcon common stock, and 0.59 share in the new company for each share of R&B; stock. The deal, which must be approved by shareholders of both Houston-based companies, is slated to close in the fourth quarter.