IRVINE, Calif. (Reuters) - Chipmaker Intersil Corp. said it plans to acquire Elantec Semiconductor Inc. for about $1.4 billion in a move to expand into additional high-growth analog markets.

Under terms of the agreement, Elantec shareholders will receive 1.24 shares of Intersil stock and $8 cash for each Elantec share, valuing Elantec's stock at $53.45 per share, a premium of nearly 30 percent based on Friday's closing price.

Intersil (ISIL: down $3.91 to $32.74, Research, Estimates) shares dropped about 11 percent at midday Monday, while shares of Elantec (ELNT: up $6.53 to $47.73, Research, Estimates) gained about 15 percent.

Elantec will be Intersil's third acquisition, having previously acquired two wireless companies.

Intersil expects the acquisition to result in cost savings through consolidation, and with these savings and excluding the impact of amortization expenses, Intersil said it sees the acquisition adding to its 2003 earnings per share.

Intersil said it expects first-quarter revenue to increase sequentially by 6 to 8 percent, versus previous guidance of 3 to 5 percent. The company increased its first-quarter earnings per share guidance to 13 cents from 12 cents.

Increased wireless demand was driving most of the upside, the firm said.

When the deal closes, which is expected in the second quarter, Intersil President and CEO Greg Williams will serve as executive chairman of the board, working on corporate, wireless and analog strategy.

Elantec President and CEO Rich Beyer will become president and CEO of Intersil. Beyer and current Elantec Chairman Jim Diller will join Intersil's board.

"Combining our businesses will allow us to become a more powerful and strategic supplier of analog and wireless products to many of our key customers, further enhancing our value proposition," Beyer said Sunday.

Intersil's sales and engineering support in a number of international markets is expected to drive incremental sales of Elantec products, Beyer added.

The combined company will have balance sheets with more than $550 million in cash and no debt, Intersil said.

Although the boards of both companies have approved the agreement, the deal is subject to customary regulatory approvals and shareholder votes. After the transaction, current Intersil shareholders will own about 77 percent, and Elantec shareholders will hold about 23 percent of the combined company's shares.

Credit Suisse First Boston served as financial advisor to Intersil and Robertson Stephens advised Elantec on the transaction.