Singapore-based chip manufacturer Avago Technologies Ltd entered into a definitive agreement to purchase LSI Corp. The deal, which is worth $6.6 billion is a major step up for the former Hewlett-Packard Co unit. Businessweek said the acquisition will allow Avago to expand to making semiconductors for disk drives and other electronics.

Financing for the acquisition of LSI will see private-equity firm Silver Lake Partners back Avago. The report said Silver Lake Partners, who earlier helped acquire Avago prior to getting listed in 2009, will provide $1 billion investment in cash. Avago will settle the rest of the payment using a $4.6 billion bank loan, Businessweek said in its report.

According to the report, the acquisition of LSI had marked the second-biggest deal for the semiconductor industry for the year. LSI's acquisition follows the auction of Tokyo Electron Ltd to Applied Materials Inc in September for $9.4 billion. The report said the acquisition will establish a business for Avago of around $5 billion in annual revenue and provide the Singapore-based firm with a a range of storage chips that it can offer to data-center customers. The deal has made Avago expect around $200 million in cost savings annually.

Avago's chief executive officer Hock Tan said in a statement, "This combination will increase the company's scale and diversify our revenue and customer base. As we integrate LSI onto the Avago platform, we expect to drive LSI's operating margins toward Avago's current levels."

The statement also said the stockholders of LSI will receive a cash payout of $11.15 per LSI common stock at the deal's completion. It is expected that the deal will be completed in the first six months of 2014, Avago's statement revealed.

Starting as an electronics division of Hewlett-Packard, Avago grew into a market pioneer of light-emitting-diode displays, said Businessweek. It since then had expanded into optical mouse sensors, fiber-optic transmitters and other equipment. A consortium of firms, including Silver Lake and KKR & Co purchased Avago for $2.66 billion. Both private firms had launch an IPO for Avago in 2009 on the Nasdaq Stock Market, the report said.