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Intel Corp agreed to buy Altera Corp for $16.7 billion as the world's biggest chipmaker seeks to make up for slowing demand from the PC industry by expanding its line-up of higher-margin chips used in data centres.
By combining with Altera, Intel will be able to bundle its processing chips with the smaller company's programmable chips, which are used, among other things, to speed up Web-searches.
Deal terms Intel said on Monday it would offer $54 per share in cash, a 10.5 percent premium to Altera's closing price on Friday.
Altera, based in San Jose, California, rejected an earlier unsolicited offer of $54 per share from Intel in April, a person familiar with the matter had told Reuters.
The deal is the third big one in the highly fragmented chip industry this year. Avago Technologies Ltd agreed last week to buy Broadcom Corp for $37 billion in the industry's biggest-ever takeover.
The deal, Intel's biggest since it bought security software maker McAfee in 2011 for $7.7 billion, follows the expiry on Monday of a standstill agreement between the companies.
The companies said they expected the deal to closed in six to nine months.
Will support Altera chips Intel will continue support and development of Altera’s ARM-based and power management chips, the companies said.
Intel already makes chips for Altera, which does not have its own foundry. The partnership, set up in 2013, is unusual for Intel, which has traditionally been unwilling to share its technology.
The New York Post reported on Thursday that Intel and Altera had restarted talks.
Up to Friday's close, Altera’s shares had risen 41.3 per cent since the Wall Street Journal reported on March 27 that Intel and Altera were in takeover talks.
NXP Semiconductors NV set off the latest round of chip industry deals in March when it agreed to buy Freescale Semiconductor Ltd for $12 billion.
Net revenue in Intel's data centre group increased 18 per cent in 2014, providing just over a quarter of overall revenue. Revenue from the company's PC group increased 4 per cent, generating about 62 per cent of total revenue.
J.P. Morgan Securities LLC and Rothschild Inc are financial advisers to Intel and Gibson, Dunn & Crutcher LLP and Weil, Gotshal & Manges LLP are legal advisers.
Goldman Sachs & Co is Altera's financial adviser and Wilson Sonsini Goodrich & Rosati Professional Corp is legal adviser.
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