Microchip developer Intersil has announced that it is buying fellow chipmaker Elantec Semiconductor for $1.4bn in stock and cash.
Under the terms of the agreement, Elantec shareholders will receive 1.24 shares of Intersil stock and $8 cash for each Elantec share, about a 30 per cent premium on Elantec's Friday night closing price.
Intersil will have a total of 145 million shares outstanding after the transaction.
The companies explained that Intersil is looking to merge Elantec's microchip business in the video and optical storage markets with its own production of chips for high-speed networks, including wireless local area networks.
Intersil expects the acquisition to result in cost savings through consolidation as well as improved analogue and wireless products for customers. The deal should close in the second quarter of this year.
Elantec chief executive and president Rich Beyer said: "We believe that combining our businesses will allow us to become a more powerful and strategic supplier of analogue and wireless products to many of our key customers, further enhancing our value proposition."
He added that Intersil's strong sales and engineering support in a number of international markets should drive incremental sales of Elantec products.
The acquisition will also help Intersil increase its business in Asia, where most of both companies' customers have factories, Beyer said. Cisco Systems, IBM, Alcatel SA, Sony and Philips Electronics are among the firms' users.
The combined company will have balance sheets with more than $550m in cash and no debt, Intersil said.
Beyer will become the new president and chief executive of Intersil. Greg Williams, the current holder of the two positions, will become executive chairman focusing on corporate, wireless and analogue strategies.
Although the boards of both companies have approved the agreement, it is subject to regulatory approval and shareholder votes.
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