Chipmaker Integrated Device Technology (IDT) is buying rival Integrated Circuit Systems (ICS) for $1.7 billion.
"This is merger of two successful companies," said IDT head Greg Lang. "We believe this is a complementary fit bringing scope and scale to both companies."
Lang will remain CEO of the combined company but warned of some competitive overlap in the communication and PC component market. He said he expected the acquisition to extend IDT's product line while saving the enlarged company up to $50 million a year, within the next four years.
ICS head Hock Tan will become chairman of the combined nine-member board, to which IDT will designate five directors and ICS, four.
The deal will see ICS shareholders receive 1.3 shares of IDT stock and $7.25 in cash per share, a combined value of around $23.54. IDT shares dropped 8 percent on the news while ICS shares rose 10 percent.
IDT made $13 million last year on $391 million in sales of its semi-conductor devices. ICS made $78.5 million on sales of $272.1 million.