Intel and STMicroelectronics are uniting to form a new company that will be the world's largest maker of chips that store software in mobile phones.
The agreement, which includes a $ 150 million investment by Silicon Valley's Francisco Partners LP, will create a company with an estimated $ 3.6 billion in annual sales, more than current market leader Spansion Inc, the companies said in a statement on Tuesday.
STMicro will hold a 48.6 per cent stake in the new operation and receive a $ 468 million payment while Intel will have 45.1 per cent stake and get $ 432 million. Francisco Partners will own 6.3 per cent of the new company.
As part of the deal, the companies arranged a $ 1.3 billion loan to cover the payments for their assets and to be used towards working capital.
Analysts welcomed the move as a way for Intel and STMicro to reduce their exposure in the flash memory market, which has been hurt by competition and price cuts but it also expected to help them grab an ever-larger market share from conventional disk drives.