Chipmaking giant Intel announced Monday it will acquire the much-smaller Altera for $16.7 billion, accelerating a wave of consolidation in the semiconductor industry.
Intel said the deal, the largest in its 47-year history, would boost its portfolio of chips for data centers and the 'Internet of Things,' an emerging area of transactions that do not require human-to-human or human-to-computer contacts.
The deal follows the May 28 announcement that Singapore-based Avago Technologies would buy rival Broadcom in a tech-sector record $37 billion deal aimed at mobile chipmaking.
Intel will pay $54 per share in cash for Altera, which designs processors for phone networks, server systems, cars and other devices.
In mid-morning trade, Altera shares rose 6.1 percent to $51.85, while Dow member Intel fell 1.6 percent to $33.90.
Altera shares were trading in the mid-$30s in March prior to US media reports of a possible deal with Intel.
The longtime leader in semiconductors for personal computers, Intel has been shifting its focus to mobile devices and connected objects. It had 2014 sales of $55.9 billion.
Intel alluded to "Moore's Law", the maxim of company cofounder Gordon Moore, which holds that the number of transistors on a chip will approximately double every 24 months.
"With this acquisition, we will harness the power of Moore's Law to make the next generation of solutions not just better, but able to do more," said Intel chief executive Brian Krazanich.
"Whether to enable new growth in the network, large cloud data centers or Internet of Things segments, our customers expect better performance at lower costs. This is the promise of Moore's Law and it's the innovation enabled by Intel and Altera joining forces."
Although competitors, the two companies in February 2013 announced an agreement in which Altera would employ Intel transistor technology in its next-generation products.
Intel is based Santa Clara, California, while Altera is in the neighboring San Jose.
Founded in 1983, Altera employs more than 3,000 people in more than 20 countries and had 2014 sales of $1.9 billion.
Altera will become a business unit under Intel, which had 106,700 employees at the end of 2014.
Intel and Altera began discussing a combination at least as early as March, but the talks were halted soon after that because of a disagreement over the price, according to US media reports.
The companies expect to complete the transaction in six to nine months. Intel will finance the purchase with a combination of cash and debt.