Chipmaker Cypress to buy peer Spansion for $1.59 billion

(Reuters) - Cypress Semiconductor Corp will buy peer Spansion Inc for $1.59 billion in stock to create a flash-memory chipmaker with more than $2 billion in annual revenue.

Spansion's stock was trading at $25.20 after the bell, lower than Cypress's offer of $25.63, based on Monday's close. Cypress shares rose 4.3 percent to $10.88.

Spansion shareholders will receive 2.457 Cypress shares for each Spansion share they own, the companies said on Monday.

Shareholders of each company will own about 50 percent of the combined entity, which will be led by Cypress' current Chief Executive, T.J. Rodgers.

The two companies said the all-stock, tax-free deal was valued at about $4 billion.

Cypress said it expects to save more than $135 million per year within three years and that it would continue to pay a quarterly dividend of 11 cents per share.

The deal will add to adjusted earnings within the first year of the deal closing, expected in first half of 2015.

Jefferies LLC and Morgan Stanley & Co LLC are Spansion's financial advisers and Fenwick & West and Latham & Watkins is legal counsel. Qatalyst Partners is Cypress's financial adviser and Wilson Sonsini Goodrich & Rosati is legal counsel.

(Reporting by Abhirup Roy and Anya George Tharakan in Bengaluru; Editing by Savio D'Souza)