LSI Logic Corp. said Monday it will purchase rival chip and storage systems maker Agere Systems Inc. for $4 billion in stock.
Agere shareholders will receive 2.16 shares of LSI for each Agere share held, valuing Agere at $22.81 per share. The purchase price represents a 28 percent premium to Agere's Friday closing price of $17.79 on the New York Stock Exchange. LSI shares ended the Friday NYSE session at $10.56.
Upon closing, LSI will issue about 379 million shares to complete the acquisition. LSI shareholders will own 52 percent of the combined company, while Agere holders will own 48 percent.
The combined company will use the LSI Logic name and have about 9,100 employees. It will have combined revenue of $3.5 billion for the 12-month period ending Sept. 30, 2006. The companies together own a patent portfolio consisting of more than 10,000 issued and pending U.S. patents.
LSI President and Chief Executive Abhi Talwalkar and non-executive Chairman James Keyes will remain in the same roles at the new company. The new board will be comprised of nine members, with six directors designated by LSI and three by Agere.
The company will be headquartered in Milpitas, Calif., but still maintain a "significant presence" in Allentown, Pa., home of Agere.
The acquisition is expected to slightly lower LSI's 2007 earnings and add to earnings per share in 2008. Cost savings are expected to reach at least $125 million in 2008.
The deal is expected to close in the first quarter of next year, subject to shareholder approvals, customary closing conditions and regulatory clearance.
Separately, LSI also said Monday its board authorized the repurchase of up to $500 million shares with available cash and short-term investments.