Western Refining ( WNR) agreed to acquire fellow oil refiner Giant Industries ( GI) for $1.2 billion plus the assumption of debt.

Western said Monday that it will pay $83 a share for Giant, representing a 16% premium over the company's closing price Friday. El Paso, Texas-based Western also will acquire $275 million of Giant's outstanding debt.

The purchase will expand Western's crude oil throughput capacity by 84% to 216,000 barrels per day, creating the fourth-largest publicly traded oil refiner in the U.S.

The company currently generates most of its revenue from its refining operations in El Paso. After the acquisition, Western will generate revenue from four different refineries as well as expand its retail and wholesale business.

"With Giant, we will significantly increase our refining capacity in fast growing, high demand areas and gain an immediate footprint in new, complementary businesses," said Western President and CEO Paul Foster in a statement. Foster will remain the combined company's head; Giant CEO Fred Holliger will become a "special adviser" to Western's board.

The companies expect the deal to close in the fourth quarter, subject to customary closing conditions and regulatory approval.

Giant shares were trading up $9.90, or 14%, to $81.69 in premarket trading. Western shares were down 74 cents, or 2.9%, to $25.25.