Denbury Resources Inc has agreed to buy Encore Acquisition Co for $3.2 billion to create one of North America's largest oil production and exploration companies.

Under the deal, Encore shareholders will get $50 per share, consisting of $15 in cash and $35 in Denbury common stock, the two companies said on Sunday.

The transaction, which represents a 35 percent premium for Encore based on its Friday close, is expected to close in the first quarter of next year.

The companies value the total transaction at $4.5 billion. That number includes $1.3 billion in Encore's debt and about $400 million for a minority interest in Encore Energy Partners LP, Encore's Chief Financial Officer Bob Reeves said in an email.

Denbury plans to finance the deal with equity and debt, and has received a commitment letter from JPMorgan for a $1.6 billion bank revolving credit facility and $1.25 billion bridge financing.

We could see some weakness related to the premium Denbury paid to Encore shareholders and the equity requirement to fund the merger, RBC Capital Markets analyst Scott Hanold wrote in a research note.

JPMorgan also advised Denbury. Barclays Capital advised Encore.

The combined companies have a unique blend of large oil fields with huge upside potential, said Encore Chief Executive Jonny Brumley in a statement.

The combined company will continue to be known as Denbury Resources and will be headquartered in Plano, Texas.

We expect the new Denbury to have growth rates of 15 percent over the next several years, RBC's Hanold said.

Together, the companies will have over 500 million BOE (barrels of oil equivalent) of additional potential barrels recoverable with CO2 tertiary operations.

(Reporting by Steve James and Anupreeta Das in New York and Ajay Kamalakaran in Bangalore, editing by Martin Golan, Bernard Orr and Muralikumar Anantharaman)

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