The wave of semiconductor mergers continues. This time it is on the capital equipment side of the semiconductor industry. Lam Research Corp. (NASDAQ: LRCX) has reached an agreement whereby it will acquire KLA-Tencor Corp. (NASDAQ: KLAC). The companies signed a definitive agreement and the boards of directors of both companies have approved the deal. Now investors have to decide if this is enough of a premium and what the combined company will offer. Lam’s market cap is $11.8 billion, and the post-merger pop takes KLA-Tencor’s market cap up to $10.3 billion.

For starters, the deal has Lam Research acquiring all outstanding shares of KLA-Tencor in a cash and stock transaction that was said to be a combined value of $10.6 billion, or $67.02 per share. KLA-Tencor stockholders will be entitled to elect to receive the economic equivalent of $32.00 in cash and 0.5 of a share of Lam Research common stock, in all-cash, all-stock or mixed consideration, subject to proration, as more fully described in the merger agreement. That $67.02 per share and $10.6 billion in a total equity value was based on the closing stock price of Lam on October 20, 2015.

The press release signaled that the combined company will have approximately $8.7 billion in pro forma annual revenue. It is also expected to be accretive to Lam’s non-GAAP earnings and free cash flow per share during the first 12 months after the close of the merger. The combined company also was projected to realize $250 million in annualized cost savings within 18 to 24 months of the deal closing, and that it would generate approximately $600 million in incremental annual revenue by 2020.

As far as the combination is concerned, a combined Lam and KLA-Tencor will create unmatched capability in process and process control, delivering optimized results in partnership with its customers by reducing variability and accelerating yield. The move is said to help the semiconductor industry extend Moore’s Law and performance scaling.

KLA-Tencor shares were last seen up 22.5% at $65.95, but the 52-week range is $44.95 to $84.21. The consensus analyst price target was shown to be $56.89 on the fundamental analyst target model.

Lam Research shares also rose on the deal, an unusual move historically in M&A. Its shares were up 6.2% at $74.35, within a 52-week range of $61.20 to $85.70.

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