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Infineon Technologies AG (IFNNY) agreed to buy Cypress Semiconductor Corp. (CY - Get Report) Monday in a deal that values the San Jose-based chipmaker at just over $10 billion.

Infineon, Europe's biggest semiconductor group, said it would pay $23.85 per share for Cypress, a major supplier of Wi-Fi/Bluetooth connectivity chips for cars, home electronics and IoT devices, a 33.8% premium to its Friday closing price.

Infineon said that deal would ultimately increased it revenue potential by around 9%, and boost annual cost savings synergies to around €180 each year by 2020. Infineon will finance around a third of the deal with its existing equity, with the remainder coming from cash and debt.

"The planned acquisition of Cypress is a landmark step in Infineon's strategic development," said CEO Reinhard Ploss. "We will strengthen and accelerate our profitable growth and put our business on a broader basis."

"With this transaction, we will be able to offer our customers the most comprehensive portfolio for linking the real with the digital world," he said. "This will open up additional growth potential in the automotive, industrial and Internet of Things sectors."

Infineon shares were marked 4.6% lower in the opening minutes of trading in Frankfurt following the deal news to change hands at €15.33 each, a move that would extend the stock's year-to-date decline to around 12%. 

Cyrpress shares spiked last week amid reports it had considered takeover interest, and has risen nearly 40% so far this year, giving the company a market value of $6.51 billion. The shares were marked 23.8% higher Monday to change hands at $22.07 each.

"The Cypress team is excited to join forces with Infineon to capitalize on the multi-billion dollar opportunities from the massive rise in connectivity and computing requirements of the next technology waves," said CEO Hassane El-Khoury. "Jointly, we will enable more secure, seamless connections, and provide more complete hardware and software sets to strengthen our customers' products and technologies in their end markets."