Semiconductor manufacturer Avago Technologies on Thursday said it plans to buy Irvine, Calif.-based Broadcom for $37 billion in cash and stock, in one of the biggest deals ever in the chip industry.

“Today’s announcement marks the combination of the unparalleled engineering prowess of Broadcom with Avago’s heritage of technology from HP, AT&T, and LSI Logic, in a landmark transaction for the semiconductor industry,” Avago president and chief executive Hock Tan said in a press release. “The combination of Avago and Broadcom creates a global diversified leader in wired and wireless communication semiconductors.”

Avago is incorporated in Singapore and has dual headquarters there and in San Jose, Calif.

semiconductorBroadcom makes semiconductors for a variety of products, including set-top boxes, cellphones, and network equipment, according to Reuters. The company is best known for its connectivity chips, which integrate Wi-Fi and Bluetooth technology and are used widely in top-tier smartphones made by Apple and Samsung.

“Demand for cheaper chips and new products to power Internet-connected gadgets is driving consolidation in the industry,” Reuters wrote. The news service cited a research note by Nomura analyst Romit Shah, who reportedly said Avago’s deal for Broadcom is a strategic fit and would enable the combined company to provide end-to-end components to the networking and infrastructure markets.

The combination of the two companies is expected to produce annual revenues of roughly $15 billion, with $750 million of projected cost savings to be achieved within 18 months, Avago said.

Under the terms of the deal, Avago would offer Broadcom shareholders $17 billion in cash and Avago shares valued at $20 billion, resulting in Broadcom shareholders owning about 32% of the combined company.

Avago intends to fund the $17 billion of cash consideration with cash on hand from the combined companies and $9 billion in new, fully-committed debt financing from a consortium of banks.

After the deal is completed, expected in the first quarter of 2016, Avago would change its name to Broadcom Ltd., with Tan continuing to serve as president and CEO. Henry Samueli, Broadcom’s co-founder, chief technical officer and chairman, would be appointed CTO of the combined company and would join its board, along with another unnamed Broadcom director.

Henry T. Nicholas, Broadcom’s other co-founder and past CEO, would serve in a strategic advisory role within the combined company, reporting to Tan.

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