Canada's Precision Drilling Corp. (NYSE: PDS) said Oct. 5 it would buy smaller rival Trinidad Drilling Ltd. in a deal valued at C$1.03 billion (US$796 million), trumping a hostile bid from Ensign Energy Services Inc.

Trinidad's board in August rejected a C$1.68 per share all-cash bid from oilfield services provider Ensign. That compared to Precision's all-stock offer for Trinidad of C$1.98 per share based on the bidder's closing price on Oct. 4.

Trinidad, which ended a strategic review in August by making changes to its board but stopping short of a sale, said Oct. 5 that Precision's offer is superior to Ensign's and reiterated that shareholders reject the unsolicited offer.

Ensign could not immediately be reached for comment.

A recovery in the Canadian oil industry has lagged a global rebound, with pipeline bottlenecks leading to a bigger-than-usual price discount for Western Canada Select heavy crude compared with U.S. crude prices

Those differentials have left Canadian oil-producing companies trailing their U.S. peers and kept them cautious about spending. Trinidad has lost money for three consecutive years and posted losses through the first two quarters of 2018.

Precision, which expects to save C$30 million through the deal, said the combined entity will have an enterprise value of about C$4 billion and operate under the Precision name.

The merger will position Precision as the third-largest driller in the U.S. with a rig fleet that includes over 200 active rigs and 322 total rigs, the companies said.

Precision offered 0.445 of its common shares for each outstanding Trinidad share, valuing it at C$1.98 per share and a premium of 7.6% to Trinidad stock's closing on Oct. 4.

Excluding debt, the deal is valued at C$551 million and is expected to close in late-2018.

RBC Capital Markets is acting as financial adviser to Precision and Torys LLP is Precision's legal adviser. TD Securities Inc. is acting as financial adviser to Trinidad and Blake, Cassels & Graydon LLP is Trinidad's legal adviser.​ ​​​​​​(US$1 = C$1.2930)