Chipmaker RF Micro Devices Inc will buy peer TriQuint Semiconductor Inc for about $1.6 billion to capture a larger share of the market for chips supplied to Apple Inc and Samsung Electronics Co Ltd.
RF Micro's shares rose as much as 18 percent in early trading on Monday.
TriQuint shares, which will be exchanged for 1.675 shares of the merged entity, rose to $11.38.
The offer was valued at $9.73 per TriQuint share, which represents a premium of 5.4 percent to the stock's Friday close.
TriQuint supplies radio frequency chips that help connect cellphones to data and voice networks to Apple and BlackBerry Ltd.
RF Micro, which makes amplifiers, power management, switch-based products and filters used for broadband mobile connectivity in smartphones, counts Samsung as its biggest customer.
"TriQuint is a very big supplier to Apple ... RFMD's got a better relationship with Samsung. So it works both ways," Northland Securities analyst Tom Sepenzis said.
Smartphone users globally are expected to triple to 5.6 billion by 2019 from 2013, according to a study by telecom networking equipment maker Ericsson. (r.reuters.com/byd27v)
Analysts said the deal would also bolster RF Micro's filters products business, which makes chips that improve the quality of wireless signals.
"RFMD is good at power amplifiers and switches and now they don't have to worry about filters. TriQuint is very good at filters," Brokerage MKM Partners analyst Ian Ing said.
The deal will also boost RF Micro's offerings for the networking infrastructure and aerospace-defense markets.
RF Micro's chips are used in broadband routers to provide WiFi connectivity and in base stations installed by telecom operators to transmit wireless network.
"Non-mobile business - we call the infrastructure and defense business - we do see a very good joining of two businesses and we think we are launching today is a $500 million infrastructure business that is very attractive part of our portfolio," TriQuint Chief Executive Ralph Quinsey said on a conference call.
Activist investor Starboard Value LP, which holds an 8 percent stake in TriQuint, asked the chipmaker last October to consider selling or restructuring its mobile power amplifier business and focus on the networks and defense businesses.
The deal, which will create a company with combined revenue of more than $2 billion, is expected to save at least $150 million in costs, the two companies said at the Mobile World Congress in Barcelona.
RF Micro shareholders will receive 1 share of the new entity for each share held.
The company said it expected the tax-free deal to close in the second half of 2014 and add to its adjusted profit in the first full year following closure.
RF Micro Chief Executive Bob Bruggeworth will be the CEO of the combined company, while TriQuint CEO Ralph Quinsey will serve as the non-executive chairman.
TriQuint's Chief Financial Officer Steve Buhaly will be the merged company's CFO.
RF Micro's shareholders will own about 50 percent of the new company, with TriQuint shareholders owning the rest.
BofA Merrill Lynch was the financial adviser to RF Micro, while Goldman Sachs advised TriQuint.
RF Micro's shares were up 15 percent at $6.69 on the Nasdaq. TriQuint's stock was about 21 percent higher at $11.15.
(Additional reporting by Abhirup Roy in Bangalore; Editing by Kirti Pandey)