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Lattice Semiconductor Corp. (LSCC) - Get Lattice Semiconductor Corporation Report on Tuesday said it would acquire Silicon Image Inc. (SIMG) in a $600 million deal the companies said would create a more efficient chipmaker better able to pursue future growth.

Terms of the deal call for Hillsboro, Ore.-based Lattice to pay $7.30 per share in cash for Silicon, a premium of 23.7% to the target's Monday close. Lattice said it expects to extract $32 million in annual synergies from the combination, which it said should immediate contribute to earnings per share.

Sunnyvale, Calif.-based Silicon is a maker of wired and wireless connectivity chips, including the near ubiquitous HDMI technology that connects high definition televisions to source components. Lattice also makes connectivity gear, and CEO Darin Billerbeck said that both companies would benefit from the creation of a one-stop-shop for the equipment.

"This is a truly transformative event for both Lattice Semiconductor and Silicon Image," Billerbeck said. "We are excited to move forward with Silicon Image and confident we will be able to drive higher revenue and earnings growth, through the benefits of better economies of scale and material cost synergies."

Silicon's products are well regarded inside the industry, but some insiders worried its small size prevented it from capitalizing on its advantages. Activist fund Engaged Capital LLC in December revealed a 5.2% stake in the company, and according to sources at the time was considering launching a proxy fight. Silicon had been on The Deal's watch list of companies most likely to be targeted by an activist before Engaged revealed its activist stake.

Camillo Martino, CEO of Silicon, said the sale "is the culmination of a strategic process conducted under the direction of our board of directors, and represents a significant creation of value for our shareholders."

Engaged Capital founder Glenn Welling has had a series of successes of late with his activist campaigns. The firm earlier this month received a seat on the board of juice retailer Jamba Inc. (JMBA), settling a proxy contest where he and another activist investor succeeded at installing two dissident directors on the company's board.

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Last year two other Engaged Capital targets, San Diego healthcare imaging company VolcanoCorp. (VOLC) and Oplink Communications Inc. (OPLK) , were sold to Royal Philips NV and Koch Industries Inc., respectively.

Other insurgencies of late have had mixed success: Abercrombie & Fitch Co.'s (ANF) - Get Abercrombie & Fitch Co. Class A Report long-time entrenched chief executive, Michael Jeffries, resigned from the teen apparel retailer in December after Welling in 2013 demanded Jeffries ouster and a sale of the company. Welling settled a proxy fight in April with Abercrombie that included a reconstituted board and a deal to separate the chairman and CEO position.

At Rentech Inc. (RTK) , Engaged Capital was partially blocked by Blackstone Group LP coming in and taking a 17% stake, which essentially forced Welling to settle a proxy fight that might otherwise have gone all the way. However, Welling did score a minor recent victory at Rentech - the wood fiber processing and fertilizer company's CEO stepped down in December.

Lattice said it would fund the purchase of Silicon via a combination of cash on hand and new debt financing, having secured a financing commitment of $350 million from Jefferies Finance LLC. There is no financing condition on the transaction.

Nathan Laverriere of Jefferies joined with a Skadden, Arps, Slate, Meagher & Flom LLP team of Thomas Ivey, Barnaby Gibson, Joseph Halloum, Charles Rogerson, Joe Casey, Joe Yaffe, Michael Wiesner, Sean Shimamoto, Nate Giesselman, Jim Brelsford, Ken Kumayama, Alec Chang, Joanna Warren and Drew Foster to advise Lattice, along with in-house counsel Byron Milstead and Jared Forsgren.

Silicon Image was advised by Barclays' Zach Righellis and David Michaels of Fenwick & West LLP.

- Ronald Orol contributed to this report.