Microchip maker Intel is buying chip designer Altera for about $16.7 billion in cash.
The deal comes after an earlier round of talks between the two companies ended in April. The transaction is the latest in ongoing consolidation in the industry that's aimed at boosting revenue and profit.
Intel was already partners with Altera, manufacturing some top-end chips designed by the much smaller company, while Altera has used some of Intel's technology in the design of its chips under a long-term agreement reached in 2013.
The acquisition would likely be the biggest in Intel Corp.'s 47-year history.
Intel, based in Santa Clara, California, is the world's largest maker of PC chips and sells most of the chips used in servers, a much more profitable product.
Altera is attractive because it makes chips used in phone networks and cars. Intel has been looking to get into those areas as demand for personal computer chips slips because more people are relying on smartphones and tablets to connect to the Internet.
Altera also sells chips known as field-programmable gate arrays that customers can later configure for specific processing or data-storage functions, including for use in cellular base stations and switching systems.
Altera Corp. stockholders will receive $54 per share, an 11 percent premium to the San Jose, California-based company's closing price of $48.85 on Friday.
Altera will become a unit of Intel. Its stock rose more than 4 percent in Monday premarket trading.
Both companies' boards approved the acquisition.
The deal, which still needs approval from Altera shareholders, is targeted to close in six to nine months. The deal is expected to add to Intel's adjusted earnings per share in the first year after closing.
Intel's shares rose slightly before the market opened.