LSI Logic and Agere Systems have entered into a definitive merger agreement under which the companies will be combined in an all-stock transaction with an equity value of approximately $4.0 billion.

Agere shareholders will receive 2.16 shares of LSI for each share of Agere they own.

The combined company, to be called LSI Logic Corporation, will offer a comprehensive set of building block solutions including semiconductors, systems and related software for storage, networking and consumer electronics products. The companies had combined revenue of $3.5 billion for the 12 months ended September 30, 2006.

“LSI and Agere share a rich heritage of innovation and thought leadership in creating enabling technologies that bring people and information together,” said Abhi Talwalkar, LSI Logic president and chief executive officer. “By joining forces, we expect the combined scale to enable us to extend our franchises in our market segments, realize significant synergies and better serve the needs of our collective customers, shareholders and employees.”

“Together, the two companies should be well positioned to achieve greater success,” said Richard Clemmer, Agere Systems president and chief executive officer. “The complementary products and capabilities of each can enable the combined company to pursue significant new opportunities while delivering more value to customers.”

The combination of LSI and Agere is anticipated to create a semiconductor and storage systems powerhouse. LSI’s presence in the storage and consumer electronics markets and Agere’s broad footprint in storage, mobility and networking should enable the combined company to drive sustainable long- term growth and shareholder value through the strengthening of its combined platforms and the expansion of its existing customer relationships.

The combined company also expects to realize substantial cost savings beginning in 2007, with annual cost savings reaching at least $125 million in 2008 from increased efficiencies in manufacturing and operating expenses.

LSI president and chief executive officer Abhi Talwalkar will serve as president and chief executive officer of the new company, which will be headquartered in Milpitas, California. The board of directors of the new company will be comprised of nine members, six being designated by LSI and three by Agere.