Dutch chip company NXP has snapped up US rival Freescale Semiconductor for $11.8bn (£7.7bn).
The deal is expected to create a combined annual turnover of $10bn (£6.5bn), with NXP claiming the new entity will have a market valuation of $40bn (£26bn).
NXP said it expects to make $200m (£130m) in the first full year after closing the transaction, "with a clear path to $500m (£325m) of annual cost synergies".
Richard Clemmer, NXP chief executive, said the merger will create "an industry powerhouse", focused on "the high-growth opportunities in the smarter world".
Gregg Lowe, chief executive of Freescale, said: "Our combined scale, size and global reach will position our new company to deliver sustainable above-market growth.”
Both companies individually recorded doubled-digit growth in 2014.
NXP, which used to be part of Philips, posted a 17 per cent increase in revenue of $5.65bn (£3.7bn). Freescale – formerly a division of Motorola – posted an 11 per cent increase in sales to $4.63bn (£3bn).
The transaction is expected to close in the second half of calendar 2015. ®