By Christopher Bjork 

MADRID-- Repsol SA reached an agreement with Talisman Energy Inc. to acquire the Canadian company for US$8.3 billion, a deal that nearly doubles the Spanish company's oil output right away and boosts its potential for further expansion.

The deal has been unanimously approved and recommended by the boards of the two companies, Madrid-based Repsol said Tuesday. Calgary-based Talisman confirmed the planned all-cash purchase. Repsol agreed to pay $8, or 9.33 Canadian dollars, for each Talisman share, a 60% premium to the average price over the past month, Talisman said. Repsol will assume $4.7 billion in debt.

The purchase is expected to close by mid-2015.

Taking on Talisman's 2,809 employees will nearly double Repsol's exploration and production staff. While the Spanish company has a market value five times as big as Talisman's, it has been a tiny competitor in oil production and for more than a year has been shopping for an acquisition that would bolster its production capacity. The addition of Talisman will increase Repsol's output by 76%, to 680,000 barrels of oil equivalent per day, and boost reserves by 55% to more than 2.3 billion barrels of oil equivalent, Repsol said.

"This is a transformative and exciting deal," said Repsol chairman Antonio Brufau. The Canadian firm will add "experience and proven track record in producing oil" to help the Spanish firm extract crude oil from deep water fields where it has recently found oil, he said.

The purchase is the largest made by any Spanish company in the past five years and will make Repsol one of the 15 largest privately owned oil and gas companies in the world, the company said.

A near-halving of oil prices since June has squeezed smaller energy companies, which are recording dwindling revenues and struggling to fund new exploration. Talisman is no exception; the firm had seen its share price more than halve since the beginning of the year.

Repsol, meanwhile, has been cash rich and short on assets after its Argentine unit YPF SA was nationalized more than two years ago. It looked at more than 100 assets worldwide before settling on a deal with Talisman. Repsol will finance part of the Talisman purchase with the $5 billion it got in compensation from Argentina's government for YPF.

The deal will sharply increase Repsol's exposure to North America, where it will assume Talisman' shale acreage in Texas, New York and Alberta. Talisman also owns oil rigs in the North Sea and off the coasts of Indonesia and Malaysia. Offshore production experience will come in handy for Repsol, which lacks expertise in this area and has made several large oil finds in deep waters outside Brazil and in the Gulf of Mexico in recent years.

Repsol and Talisman flirted with a deal during the summer, but talks cooled because of differences over price. As oil prices plunged in the autumn, Repsol started to look elsewhere for a deal, while Talisman's share price sank.

Then, about a month ago, Talisman put out new feelers with Repsol, and talks moved quickly in the past 10 days, according to a person familiar with the talks.

JP Morgan advised Repsol, while Goldman Sachs and Nomura advised Talisman.

Write to Christopher Bjork at christopher.bjork@wsj.com

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