Transocean Inc., the world's largest offshore driller, said on Monday it would buy GlobalSantaFe Corp. for about $17 billion in a no-premium deal, adding a fleet of shallow-water drilling rigs to its deepwater equipment.

The deal includes stock, as well as pay-out to shareholders of both companies totaling $15 billion.

The link-up of the two largest drillers comes amid speculation that oil drillers would seek mergers to gain market share and take advantage of the huge spending increases in the energy sector, particularly for the development of offshore fields.

But that consolidation has been hampered by historically high stock prices in the sector which have made acquisitions too expensive.

In order to get around those valuations, the companies have agreed to a stock deal, while also leveraging their combined $33 billion in contracted orders to borrow $15 billion that it will pay out to shareholders of both companies as a dividend.

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

They have managed to dividend-out a portion of their backlogs, Urness said.

The combined company would use its first two years of free cash flow to reduce debt.

News of the deal sent shares of Transocean up about 8 percent to $118.75 while GlobalSantaFe shares followed along, gaining about 7.2 percent to $80.15.

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

The combined company, which would be known as Transocean Inc., would have a global fleet of 146 rigs. The company would have offices in Houston and trade on the New York Stock Exchange under Transocean's current symbol RIG.

Transocean's 82 rigs are focused mostly on the deepest oil and gas drilling projects, which have seen day-rates jump to more than $500,000 in recent years, while GlobalSanteFe's fleet is heavy on jack-up rigs used in shallower waters.

Transocean Chief Executive Robert Long would continue in that role after the merger, while GlobalSantaFe President and CEO Jon Marshall would serve as Transocean's president and chief operating officer.

Both companies would have equal representation on 14-member board, chaired by GlobalSantaFe's Chairman Robert Rose.

Transocean was advised by Goldman Sachs while Lehman Brothers advised GlobalSantaFe. Goldman and Lehman are providing the financing for the recapitalization.

(Reporting by Caroline Humer and Matt Daily in New York and Jessica Hall in Philadelphia)