Japanese auto chipmaker Renesas Electronics said it was buying UK-based rival Dialog Semiconductor in a 4.9bn (£4.3bn) cash offer.
Renesas, which has 30% of the car microcontroller market, is offering 67.50 a share, sending shares in Dialog soaring.
The offer price is a 20% premium to Dialog’s Friday close of 56.12. Shares in the company, which supplies chips for Apple’s 5G mobile phones, have risen around 25% since the start of the year.
Dialog had been in advanced discussions with suitors including Renesas and was previously holding discussions with STMicroelectronics before the Franco-Italian company was reportedly outbid.
Renesas said it would issue up to 270 billion yen (£2.86bn) in new shares to help fund the deal. It anticipates incremental revenue growth from the deal of approximately $200m in four to five years after the deal close, while cost savings of $125m would materialise over three years.
The volume of deals involving semiconductor companies more than doubled last year to $144bn, according to data compiled by Bloomberg.
Nvidia Corp agreed in September to buy SoftBank’s chip division Arm for $40bn. The deal is set to be investigated by UK regulators, which has since said it would start to probe strategic deals in the tech sector, regardless of size.