(Bloomberg) -- Australia’s second- and third-biggest oil and gas companies will merge to become one of the largest in the region and in the top 20 globally.

Oil Search Ltd. on Monday said it agreed to an improved all-share offer from Santos Ltd. that would give its equity holders 0.6275 new Santos shares for each one held, giving them about 38.5% of the merged group. The combined entity would have a market capitalization of about $16 billion, vying with Woodside Petroleum Ltd. to be Australia’s biggest independent liquefied natural gas producer.

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The announcement comes less than two weeks after Oil Search rejected an earlier proposal offering 0.589 shares in Santos for each one of Oil Search’s. The non-binding, indicative offer “presents Oil Search shareholders with an opportunity to maintain ongoing exposure to Oil Search’s portfolio of world-class assets as part of a merged group for which there is strategic logic,” the Sydney-based company said in a statement.

The deal would combine Oil Search’s operating assets in Papua New Guinea with Santos’s gas portfolio in Australia, which includes the Gladstone LNG export facility in Queensland and the Darwin LNG plant in the Northern Territory. Santos also has a stake in the Exxon Mobil Corp.-operated PNG LNG project.

Combining the two companies would improve the alignment of growth projects in PNG, Santos said in a statement. Oil Search is a junior partner in the TotalEnergies SE-operated Papua LNG project, which plans to use processing infrastructure at the PNG LNG plant.

The pair’s diverse portfolio of core assets would help reduce exposure to operational risks and provide a strong platform for sustainable growth, Santos said, while adding that the scale of the merged group would open it up to a wider pool of investors. The agreement is subject to conditions including regulatory approval.

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