San Francisco: Qualcomm Inc, the largest maker of mobile-phone chips, will acquire NXP Semiconductors NV in a transaction valued at $47 billion, aiming to speed an expansion into new industries and reduce its dependence on the smartphone market.

San Diego-based Qualcomm agreed to pay $110 a share in cash for NXP, the biggest supplier of chips used in the automotive industry, or 11 per cent more than Wednesday’s close, the companies said in a statement Thursday. The deal will be funded with cash on hand as well as new debt.

Chief Executive Officer Steve Mollenkopf is betting the deal, the largest in the chip industry’s history, will accelerate his company’s entry into the burgeoning market for electronics in cars. Eindhoven, Netherlands-based NXP is strong in that sector following its acquisition last year of Freescale Semiconductor Ltd.

“It’s no secret that we’ve been looking around,” Mollenkopf said in an interview. “ If you look at our growth strategy it’s to grow into adjacent markets at the time that they are being disrupted by the technology of mobile.”

The purchase is Qualcomm’s response to slowing growth in demand for smartphones, which provide the bulk of the company’s revenue. The two companies, which will have combined revenue of more than $30 billion, will have products that are capable of winning sales in markets worth $138 billion by 2020, Qualcomm predicted. Two years after the transaction closes, Qualcomm forecast $500 million of annual cost savings.

The equity value of the transaction is $38.5 billion. Including debt, the enterprise value goes up to $47 billion, according to Chief Financial Officer George Davis. The acquisition will add $11 billion of debt to Qualcomm’s balance sheet, which it will be able to rapidly improve by using the overseas cash it generates to pay down, Davis said.

Mollenkopf said he will aim to combine the two companies and their products as quickly as he can and make sure that the management of the combined company has representatives from both sides.

NXP stock rose 2.8 per cent to $101.45 in early US trading. Qualcomm gained 2 per cent to $69.60.

Record consolidation:

Last year was a record for chip-industry consolidation, with semiconductor makers getting together to weather rising costs and a shrinking list of customers. Though he sat out the deal spree in 2015, Mollenkopf is now making use of his company’s more than $30 billion in cash reserves, most of which is held overseas.

“There just isn’t enough mobile growth to be had “”- they are already the dominant chip supplier and licenser of intellectual property in an industry where the product is being commoditised and volume growth is moderating,” said Sid Parakh, a fund manager at Becker Capital Management, which owns Qualcomm stock. “As a long-term investor, I would much rather have a more diverse company that has the potential to participate in new markets and probably grow significantly more than it would in a mobile-only world.”

NXP is projected to report 2016 sales of $9.48 billion, the average of analysts’ estimates from data compiled by Bloomberg. By revenue, that makes it less than half the size of Qualcomm, which will report sales of $23.2 billion this year, according to analysts. Still, the Dutch company has averaged about 11 per cent growth over the past three years, while the US chipmaker’s sales declined 5 per cent last year, a collapse from a revenue increase of 30 per cent in 2013.