Avago Technologies Ltd., a Singapore-based chip manufacturer that began as a unit of Hewlett-Packard Co., agreed to buy San Jose, Calif.-based LSI Corp. for $6.6 billion, gaining semiconductors for disk drives and other electronics.

Avago will pay $1 billion in cash and use a $4.6 billion bank loan, the companies said in a statement today. Silver Lake Partners, a private-equity firm that helped acquire Avago before its initial public offering in 2009, will provide a $1 billion investment toward the all-cash purchase.

The transaction marks the year’s second-biggest deal for the semiconductor industry, following the $9.4 billion acquisition of Tokyo Electron Ltd. by Applied Materials Inc. in September. Today’s purchase would create a business with about $5 billion in annual revenue and provide Avago with a range of storage chips that it can sell to data-center customers. Avago also expects to get $200 million in annual cost savings.

“This combination will increase the company’s scale and diversify our revenue and customer base,” Hock Tan, Avago’s chief executive officer, said in the statement. “As we integrate LSI onto the Avago platform, we expect to drive LSI’s operating margins toward Avago’s current levels.”

LSI jumped 39 percent to $10.96 in early trading after the deal was announced. Avago rose 10 percent to $50.40.

Earnings Boost

LSI’s stockholders will receive $11.15 in cash for each share of LSI common stock at the completion of the deal, which is expected in the first half of 2014, according to the statement. The transaction will boost Avago’s free cash flow and earnings per share immediately after it closes, the company said.

The purchase would be the largest deal for Avago, which was founded in 1961 as an electronics division of Hewlett-Packard. It pioneered the market for light-emitting-diode displays before expanding into fiber-optic transmitters, optical mouse sensors and other equipment. It then became part of the Agilent Technologies Inc. spinoff from Hewlett-Packard in 2000.

In 2005, a group of private-equity firms, including Silver Lake and KKR & Co., acquired the business for $2.66 billion. They orchestrated an IPO for the company, which debuted on the Nasdaq Stock Market in 2009.

The company is also headquartered in Singapore.

--Editors: Nick Turner, Jillian Ward