Chipmaker Avago Technologies Ltd. announced Monday that it is buying LSI Corp. for $6.6 billion "to help strengthen its position in the enterprise storage market and broaden its offerings."
Avago, a Singaporean company with joint headquarters in that Asian city state and San Jose, California, makes analog semiconductor devices for wireless communications and wired infrastructure.
San Jose-based LSI designs semiconductors and software to accelerate storage and networking.
Avago will pay LSI shareholders $11.15 per share, which represents a 40 percent premium over the firm's Friday closing price of $7.94.
The acquisition, Avago's largest so far, creates a company with annual income of some $5 billion.
"This combination will increase the company's scale and diversify our revenue and customer base," Avago President and CEO Hock Tan said in a statement.
In addition, Avago hopes to improve LSI's business margin and for the operation to create savings of $200 million in the first full year after it is completed.
Avago will pay for the acquisition with $1 billion in cash, a $4.6 billion loan from a group of banks and a $1 billion investment from Silver Lake Partners.
After announcing the operation, shares of Avago were up almost 8 percent by mid-morning, while those of LSI shot up by almost 39 percent. Both companies' shares are traded on the Nasdaq exchange. EFE