Applied Micro Circuits Corp. (AMCC) in San Diego said it will buy MMC Networks Inc. in Sunnyvale, Calif. for $US4.5 billion in stock.
AMCC develops chips used in fiber-optics communications equipment. MMC makes network processors and communications management equipment.
Under the terms of the agreement, AMCC will issue 0.619 shares of its stock for every share of MMC, the companies said in a statement issued yesterday. The merger, indicative of the growing trend of consolidation in the semiconductor industry, is expected to close in the fourth quarter of this year. Both companies' boards of directors have approved the agreement, the companies said.
The merger is the second-largest deal in semiconductor history, behind the $7.6 billion June merger of Dallas-based semiconductor company Texas Instruments Inc. and Burr-Brown Corp. in Tucson, Ariz., maker of high-performance data converters and amplifiers.
"This powerful merger of two market leaders creates tremendous synergy and opportunities for the combined companies in both the optical networking market and many other emerging platforms at the WAN edge," AMCC's CEO Dave Rickey said in the statement. "With this merger, we can provide the most complete and powerful integrated circuit solutions for this rapidly growing market."
Alvin Kressler, an analyst at the New York-based Kaufman Brothers LP, said, "This extends the [companies'] product line so they can offer customers basically the key semiconductor pieces for a communications switch, saving vendors significant design time."