Semiconductor manufacturer Avago (AVGO) said it will pay $6.6 billion to buy venerable storage chip maker LSI (LSI), in the largest acquisition ever for the Singapore-based wireless and wired specialist and one of the industry’s heftiest deals this year.

The deal makes Avago, once a Hewlett-Packard (HPQ) unit, a diversified, $5 billion competitor and supplies it with an instant presence in the lucrative networking and enterprise storage chip market—a segment where LSI generated $607 million in Q3 sales, a 3 percent year-over-year slide but consistent with expectations, and $37 million in earnings, down 7.5 percent from last year.

Avago said that once the deal is done about 38 percent of its sales will come from enterprise storage, reducing its dependence on the more volatile wireless business to about 25 percent of overall revenue.

"This highly complementary and compelling acquisition positions Avago as a leader in the enterprise storage market and expands our offerings and capabilities in wired infrastructure, particularly system-level expertise," said Hock Tan, Avago president and chief executive. "This combination will increase the company's scale and diversify our revenue and customer base.”

Under terms of the transaction, Avago will pay $11.15 per share for LSI, a 40 percent premium over the data center storage company’s closing stock price on Dec. 14. LSI’s shares closed on Dec. 16 at $10.96, just under the sale price and 3 cents off its 52-week high.

Avago said it will fund the deal with $1 billion in cash from the combined balance sheet and a $4.6 billion loan from a group of banks, supplemented by a $1 billion investment from Silver Lake Partners as a seven-year, 2 percent convertible note at $48.04 per share.

Silver Lake maintains a seat on Avago’s board from previous holdings in the company.

Avago said it expects the transaction will provide an immediate bump to its cash flow and per-share earnings and provide significant economies of scale with annual cost savings projected in the $200 million a year range by Nov. 1, 2015.

Both companies’ boards have approved the transaction but it still requires regulatory approval and the nod from LSI shareholders.

Avago lists Apple (AAPL), Cisco Systems (CSCO), Huawei, LG and Samsung as key customers.