LSI Logic and Agere Systems today announced that they have entered into a definitive merger agreement.

The combined company, to be called LSI Logic Corporation, will offer components including semiconductors, systems and related software for storage, networking and consumer electronics products.

The companies, which operate in more than 20 countries with a combined workforce of approximately 9,100 employees, had combined revenue of $3.5bn for the 12 months ended 30 September 2006.

The new entity expects to be able to deliver "substantial cost savings" beginning in 2007, with annual savings estimated at $125m in 2008 from increased efficiencies in manufacturing and operating expenses.

Abhi Talwalkar, president and chief executive at LSI Logic, said: "By joining forces we expect the combined scale to enable us to extend our franchises in our market segments, realise significant synergies and better serve the needs of our collective customers, shareholders and employees."

LSI president and chief executive Abhi Talwalkar will serve as president and chief executive of the new company, which will be headquartered in Milpitas, California, and will maintain a presence in Allentown, Pennsylvania with various other locations worldwide.

LSI non-executive chairman James Keyes will continue as non-executive chairman of the board of directors of the new company.