Santa Clara, Calif.-based Intel (INTC) said each share of Level One (LEVL) stock would be exchanged for 0.43 shares of Intel. It said 18.6 million shares of stock would be issued to complete the merger.
Shares of Level One rose 18 3/4 to 45 7/8 while Intel shares picked up 2 5/8, 2.3 percent, to 116.
The deal is expected to close by the end of the second quarter, with Level One becoming a wholly owned subsidiary under Intel's network communications group, the companies said. Level One employees would stay on the job as employees of the subsidiary. The merger is subject to Level One shareholder approval and regulatory review.
The companies said Intel's previously announced 2-for-1 stock split would be taken into account in setting the deal's exchange rate and total number of shares.
The companies also said they don't expect "any immediate changes to either [company's] product lines," adding that they hope to give "customers advanced networking capabilities by offering increased bandwidth and functionality."
Level One said it anticipates continuing with its current manufacturing relationships.
The merger "extends our strength in networking and communications," Craig Barrett, president and chief executive officer of Intel, said Thursday. "It provides us with the silicon building blocks necessary to supply the rapidly growing demands created by the Internet and e-commerce."
Level One shares had dropped sharply Thursday on news the company was downgraded by Adams Harkness from "strong buy" to "accumulate." Gruntal & Co. had raised Intel's rating from "buy" to "strong buy."
Shares of Sacramento, Calif.-based integrated circuit maker Level One closed down 5 1/4 to 27 1/8 Thursday.