Under the deal announced Monday, each C&C (TSX:CZE) share will be exchanged for 0.3528 Pacific Rubiales shares, for a total value of $7.81 per share, or about $500 million.
C&C investors will also get a share of the combined company, dubbed Newco, which are worth another $2 per share.
The combined value of $9.81 per share marks a 52 per cent premium over C&C's volume-weighted share price in the 20 days leading up to Friday.
Pacific Rubiales (TSX:PRE) expects to keep a five per cent interest in Newco.
"We consider this to be a win-win for the shareholders of both companies. For Pacific Rubiales shareholders, it adds production and reserves at attractive and accretive metrics and assets whose value can be increased through accelerated activity and transportation and marketing synergies," said Pacific Rubiales CEO Ronald Pantin.
"For C&C Energia shareholders, it provides an immediate premium valuation, enhanced liquidity and participation in the growth of Colombia's largest independent oil company with a history of generating consistent shareholder returns. C&C Energia shareholders will also have continued exposure to the producing assets through the new ownership in Pacific Rubiales common shares as well as the exploration upside provided by a well-funded Newco."
The deal, which is subject to shareholder, regulatory and stock-market approval, is expected to close early next year.
C&C shares rose nearly 19 per cent to $8.90 on the Toronto Stock Exchange Monday afternoon.
Pacific Rubiales stock dropped about 1.5 per cent to $21.79 on the TSX.