Textron Inc. said yesterday it will pay $1.4 billion to acquire Avco Corp., a merger of near equals that would create a huge conglomerate with roughly $6 billion in annual sales.

The agreement, unanimously approved by Avco's board of directors, came three days after Textron's unsolicited takeover bid and allows the Providence-based conglomerate to acquire Avco's outstanding common stock, about 23 million shares, at $50 per share.

In addition, the agreement included a provision giving Textron an option to purchase 4.3 million newly issued shares of Avco common stock, creating a total transaction worth about $1.4 billion, Textron spokesman John Carberg said.

According to Carberg, the provision was included to reduce the chances of a third party interfering in the deal. When the merger is completed in about a month, combined annual sales are expected to be in the $6 billion range, placing the company in or near the top 50 on the Fortune 500 list, Carberg said. "It's essentially doubling the size of Textron," he said, adding that a formal tender offer would be made this week.

Under the agreement, Robert P. Bauman, chairman and chief executive officer of the Greenwich, Conn.-based Avco, would join Textron's board, becoming vice chairman. Five other Avco directors would join Textron's board.

Meanwhile, Standard & Poor's announced yesterday it is lowering the senior debt rating for Textron, Textron International and Textron Financial Corp. to A from AA-.