Zoran ( ZRAN) agreed to acquire Oak Technology ( OAKT) for about $5.88 in cash and stock, in a merger of specialty chipmakers.

The acquisition is worth about $358 million, with Zoran holders owning about two-thirds of the combined firm. Santa Clara, Calif.-based Zoran makes integrated circuits for DVD players and digital cameras, while Sunnyvale-based Oak makes them for HDTV and the digital imaging market.

"Together, Zoran and Oak should benefit from a more diversified revenue stream and customer base. Moreover, we anticipate accelerated revenue growth opportunities and potential cost synergies of $13 to $18 million annually, beginning in 2004," the companies said in a statement.

Each outstanding Oak common share will be exchanged for 0.2323 of a Zoran common share plus $1.78 in cash. Oak's shares were recently trading up 15% at $5.43, while Zoran's shares were down 8% at $16.18.

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