Intel agreed to buy Altera for $16.7 billion as the world's biggest chipmaker seeks to make up for slowing demand from the PC industry by expanding its line-up of higher-margin chips used in data centers. chips with the smaller company's programmable chips, which are used, among other things, to speed up Web-searches.
Intel said it would offer $54 per share in cash, a 10.5 percent premium to Altera's closing price on Friday.
Altera, based in San Jose, California, rejected an earlier unsolicited offer of $54 per share from Intel in April, a person familiar with the matter had told Reuters.
The deal is the third big one in the highly fragmented chip industry this year. Avago Technologies agreed last week to buy Broadcom for $37 billion in the industry's biggest-ever takeover.