UPDATE 1-Transmeridian Exploration to merge with Trans Meridian

(Adds details, share movement)

Dec 31 (Reuters) - Transmeridian Exploration Inc TMY.A said it agreed to merge with Trans Meridian International Inc, a British Virgin Islands company formed by its chief executive officer Lorrie Olivier, sending shares up 60 percent.

Under the terms, Trans Meridian International will commence a tender offer to buy all of Transmeridian Exploration's common stock at $3 a share, a 114 percent premium over its $1.40 closing price on Dec. 28.

Transmeridian Exploration said the deal implies an enterprise value of about $825 million.

The merger agreement permits the company to solicit competing offers for acquiring it until the financing condition to Trans Meridian International's obligation to commence the tender offer is satisfied, Transmeridian Exploration said in a statement.

Shares of the company were up 84 cents at $2.24 in morning trade on the American Stock Exchange. (Reporting by Sharangdhar Limaye in Bangalore; Editing by Anupama Dwivedi, Deepak Kannan)