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LSI to Buy Agere for $4B

LSI Logic Corp. (NYSE: LSI) is buying Agere Systems Inc. (NYSE: AGR.A) in an all-stock deal valued at $4 billion, the two chip companies announced today.

The transaction will create a "storage, networking and consumer powerhouse" that will supply chips, systems, and software to equipment vendors, the firms say. LSI Logic is a major player in storage networking and consumer electronics (DVDs, DVRs, set-top boxes, and satellite navigation systems, for example), while Agere is one of the leading chip firms in fixed and wireless networking and storage, with a particular focus on delivering broadband access capabilities. (See LSI Delivers Second-Gen SAS, Ericsson Picks Agere, Access Pays Off for Agere, NEC Picks Agere, and 3Com Picks Agere.)

Agere's investors will receive 2.16 shares of LSI stock for each Agere share they own. Based on LSI Logic's closing price of $10.56, that values each Agere share at $22.81. That's a 28 percent premium over Agere's closing price on Friday of $17.79.

LSI will issue about 379 million new shares to complete the takeover, after which LSI shareholders will hold 52 percent of the combined company. The deal is expected to close in the first calendar quarter of 2007.

The two companies, which had combined revenues of about $3.5 billion in the 12 months to the end of September, will have 9,100 staff, including about 4,300 engineers. LSI's current president and CEO, Abhi Talwalkar, will hold the same post in the combined company, which will retain the LSI Logic name. The new board of nine will comprise six people designated by LSI Logic, including non-executive chairman James Keyes, and three named by Agere. (See LSI Logic Reports Strong Q2 and Agere Soars on Q3 Earnings).

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