The combined company, to be called Lam Research and will have a market capitalization of around $19 billion, about equal to that of Applied Materials. It will have control of 42 percent of the wafer fabrication equipment market when the deal closes in the middle of next year.

Lam says it will make $250 million in annualized savings within two years as a result of the deal. In 2011 Lam Research bought its rival Novellus Systems again making a similar comment stating that it could increase its revenue faster than either company could on its own. The company also expects it to speed up its earnings growth.

Given the complementary nature of the two companies’ product offerings and technologies as well as the lack of product overlap, the combination will create an industry leader with greater opportunities for our respective employees for professional development and growth,” he added.

Steve Newberry, Lam Research’s chairman, will continue in that role and two board members from KLA-Tencor will join the combined company board effective upon closing.

LAM said it would fund the cash part of the deal, and repay KLA-Tencor’s outstanding term loan, from cash of $1.9 billion and $3.9 billion in debt financing.

The deal, which is subject to the approval of both sets of shareholders and regulators, is expected to close mid-2016.