Norsk Hydro ASA, Oslo, Norway, (NYSE: NHY) plans to acquire Houston-based, Gulf-focused Spinnaker Exploration Co. (NYSE: SKE) for $65.50 per share, totaling $2.45 billion in cash, plus assumption of $110 million of net debt in a deal valued at $2.56 billion. The transaction is expected to be completed in this quarter. Randall & Dewey, a division of Jefferies & Co., and Credit Suisse First Boston were advisors to Spinnaker. Spinnaker's production is some 23,000 BOE per day and its total reserves are 129 million BOE, all in the Gulf of Mexico. It has an extensive seismic database covering most of the Gulf and significant exploration acreage. It also has exploration positions in Nigeria. Hydro has current production of some 575,000 BOE per day. It expects to fund the acquisition with cash on hand. Roger Jarvis, Spinnaker chairman and chief executive, says, "This transaction allows Spinnaker Exploration shareholders to realize substantial and immediate value at an attractive premium and gives Spinnaker Exploration employees the opportunity to join a new, successful team." Following closing, Hydro expects 2005-08 production to be 40% international. Eivind Reiten, Hydro president and chief executive officer, says, "The acquisition is an important breakthrough in Hydro's international growth strategy. Hydro's industry-leading expertise in deepwater exploration and production, combined with Spinnaker's unique skills and acreage position in the region, will enable us to develop these prospects profitably in a stable and attractive fiscal environment." Jay Saunders, an analyst with Deutsche Bank, says Norsk Hydro's plan to buy Spinnaker sets a new high-water mark on acquisition prices. "At $65.50 per share the premium comes to 34% on a stock that rose 10% during the past week and a half." Spinnaker's most prominent asset is the deepwater Front Runner Field. He calculates the deal at $41.29 per proved bbl. and $111 per 1,000 bbl. per day of production-more than double that of recent deals. "Adding expected probable, possible and potential reserves of 77 million BOE the price falls to a still-high $19.80. Clearly this is a strategic move from largely state-owned Norsk, which would get an extensive seismic library from Spinnaker and important infrastructure access in the eastern Gulf," he says. "The high price, of course, is positive for anyone with GOM assets. Pioneer Natural Resources, which is exiting the GOM, is timing its sale well. Kerr-McGee has a package of onshore and shelf assets for sale that we think will go expensively as well." Standard & Poor's Ratings Services reports its outlook on Norsk Hydro's A- debt remains unchanged.