Arc Resources Ltd. and Seven Generations Energy Ltd. announced a tie-up late Wednesday, in a transaction that would bring together a pair of major players in Canada's Montney region.

Under the terms of the transaction, Seven Generations shareholders will receive 1.108 Arc shares for each share held. Once the deal closes, Arc's shareholders will own 49 per cent of the combined entity and Seven Generations holders will own 51 per cent, according to a joint media release. The combined company will retain Arc's name and will be headquartered in Calgary.

According to the release, the combined company will be "the largest pure-play Montney producer" with annual production hitting 340,000 barrels of oil equivalent per day across 1.1 million acres of land. The companies said they see potential for $110 million in annual cost savings by next year.

According to the companies, the combined entity would be the sixth-largest upstream energy producer in Canada. The combined firm plans to continue to pay Arc’s current $0.06 per share quarterly dividend, subject to approval from its board.

While Seven Generations' investors will hold a narrow majority of the shares, Arc will have a stronger hand in the boardroom. Indeed, the two companies said the combined entity's board of directors will have 11 members, with six seats occupied by Arc appointees.

Arc Chair Hal Kvisle, an industry veteran who has previously served as CEO of TransCanada Corp and Talisman Energy Inc., will remain chair after the deal closes, while Arc President and CEO Terry Anderson will hang on to those titles.

The deal is subject to customary closing conditions, including a vote by Seven Generations shareholders on the offer, and a vote by Arc shareholders on the necessary share issuance. Canada Pension Plan Investment Board, which owns 16.8 per cent of Seven Generations' shares, has already confirmed its intent to support the offer, according to the release.

The two companies said they expect the deal to close in the second quarter of this year.

RBC is serving as Arc's financial advisor on the deal, while CIBC is advising Seven Generations.