Wireless networking group Intersil is to buy fellow Californian analogue IC specialist Elantec Semiconductor in a $1.4bn cash-and-stock deal.
The companies' boards have both approved the deal, describing it as combining "two leaders in some of the fastest growing markets in the semiconductor industry".
Intersil sees its acquisition as a good match with its own specialisations in wireless lan and power management. Elantec develops chips for the optical storage and flat panel display markets.
"Intersil and Elantec share a significant number of customers and have complementary product portfolios. In addition, both companies share a fundamental vision of providing system level value for their target markets," a statement said.
Intersil will pay Elantec investors 1.24 shares of Intersil stock and $8.00 in cash for each Elantec share. Based on Intersil's closing price of $36.65 the deal has a value of approximately $1.4bn. Elantec's board has secured a valuation about 15% ahead of the company's average share price over the last month.
Greg Williams, Intersil's president and CEO, will serve as executive chairman of the board. Rich Beyer, Elantec's president and CEO, will become president and CEO of Intersil.
Dan Heneghan, Intersil's chief financial officer, said: "The combined company will have one of the industry's strongest balance sheets, with greater than $550m cash after the transaction and no debt.
"Demand for Intersil products is accelerating with orders running above expectations in each of our product lines. We now expect first quarter revenues to increase sequentially by 6% to 8%, versus previous guidance of 3% to 5%."