June 10 (Reuters) - U.S. offshore drilling contractor

Noble Corp ( NBLWF ) will acquire smaller rival Diamond Offshore

Drilling ( DO ) in a $1.59 billion cash-and-stock deal, the

companies said on Monday.

Noble will pay $15.52 per Diamond Offshore ( DO ) share, of which

$5.65 will be in cash and the rest in Noble shares -- an offer

that the boards of both companies have approved, they said.

The offer represents an 11.4% premium to the closing price

of Diamond Offshore's ( DO ) stock on Friday.

Noble said it would fund the cash portion of the deal

through a new secured $600 million committed bridge financing

facility.

It expects the deal to immediately add to its free cash flow

per share and estimates annual pre-tax cost synergies of $100

million, 75% of which it expects to come within one year of the

deal closing.

Nobel's board also approved a 25% increase in its quarterly

dividend to 50 cents per share.