NEW YORK, DEC. 3 -- Ending 10 days of merger speculation and 83 years of independence, E.F. Hutton Group Inc. today announced that it has formally agreed to be acquired by Shearson Lehman Bros. for about $960 million.

The deal will make Shearson a formidable presence in the brokerage and investment banking businesses, ranking it with Merrill Lynch & Co. Inc. as one of the country's two largest securities firms. By some measures, Shearson will become the nation's largest investment bank.

Thousands of Hutton employes are expected to lose their jobs as a result of the merger. Hutton now has about 18,000 employes worldwide; analysts said as many as 8,000 could be out of work when the firm's operations are integrated with Shearson's.

While acknowledging that there will be substantial layoffs as a result of the merger, Shearson declined to comment specifically on how many Hutton employes would be cut. Shearson officials already have begun to meet with Hutton employes and to plan for a reorganization. The mood at Hutton today was described by employes there as bleak.

Hutton put itself up for sale last week, acknowledging that it could no longer afford to remain independent in the face of legal and financial troubles that have dogged the firm since 1985, when Hutton entered a guilty plea to 2,000 counts of fraud stemming from a check-kiting scheme.

For two years, Hutton's board has tussled with its management and struggled to bring its far-flung retail brokerage operations under firmer control. The drastic collapse of stock prices in October apparently signaled the end of the board's efforts.

"October 19 clearly changed the world for everybody," said Robert P. Rittereiser, Hutton's chief executive. "We did not have what I would call a Hutton-specific problem {because of the market collapse}. ... I think it was a broader problem."

For Shearson, which is 62 percent owned by American Express Co., the deal caps a decade of steady expansion in which the firm has emerged as a major player in both the retail brokerage and institutional investment banking areas.

"What we have achieved is something really unique in the securities industry of this country," said Peter A. Cohen, Shearson's chairman. The Hutton deal, he said, will provide Shearson with the capital and manpower to play a dominant role in the investment business.

"Our industry is more and more becoming an oligopoly," Cohen said, with a few large firms consolidating market share. Analysts said that trend is likely to continue in the aftermath of the stock market's collapse.

After reportedly attempting to acquire Hutton last year for a higher price than it has now agreed to pay, Shearson seized this latest opportunity because it coveted Hutton's extensive retail brokerage and asset management operations, analysts said. The combined firm will have total capital of $3.7 billion and $102 billion in assets under management, according to Shearson.

"Coming out of this you're going to have a better-balanced Shearson with less cyclicality in earnings," said John P. Larson, an analyst with Blunt Ellis & Loewi.

The merger will be accomplished primarily through a cash tender offer of $29.25 per share for about 85 percent of Hutton's outstanding shares, to be started by Shearson within a few days. When the tender offer is completed, the remaining 15 percent of Hutton's stock will be exchanged for $139.8 million in Shearson debt securities.

The price to be paid by Shearson is only slightly above Hutton's book value, or net worth as stated by the firm, of $26 per share. Hutton could not command a higher price because it chose to sell at a moment of deep uncertainty in the financial services business, according to analysts and Wall Street officials.

Rittereiser said today that other firms besides Shearson had made offers to buy Hutton, but he declined to identify the firms or to disclose any prices that had been suggested. Dean Witter Reynolds Inc., a unit of Sears, Roebuck & Co., said earlier this week that it had held talks with Hutton.

Shearson executives said that no decision has yet been made on what the combined firm will be named. They said that marketing studies will be conducted during the next few weeks to explore whether it makes sense to retain the Hutton name.