Both Jazz Technologies (Newport, Calif.) and its subsidiary, Jazz Semiconductor, Inc., will now became wholly owned subsidiaries of Tower Semiconductor (Migdal Haemek, Israel).

Gil Amelio will retire as Jazz Chairman and CEO, but serve as a special advisor to Tower's Board of Directors.

Under the terms, revealed in May, Tower is buying all of the outstanding shares of Jazz at an equity value of approximately $40 million. The total value of the transaction, including net debt, is approximately $169 million.

The move combines Tower's strength in CMOS image sensor, non-volatile memory and RF CMOS with Jazz's expertise in mixed signal, power management and RF.

Tower also expands its fab portfolio. The company has its fabs in Israel. Jazz has a fab in Newport Beach and has capacity agreements with various foundries in China. In total, the combined company offers capacity of approximately 750,000 8-inch wafer starts annually.

Russell Ellwanger, Tower's chief executive officer, will take over as chairman of Jazz, and will be responsible for developing final details of the merged organizational structure and the integration plan over the next months.

Ellwanger commented: "We expect the merger of the two companies to provide expanded opportunities for growth based on the significant cross-selling opportunities and the broader, more complete product, technology, and service portfolio we are now able to offer to customers. These opportunities further enhance the immediate benefits we expect the merger to provide to our cost structure, which when combined with the recently announced anticipated restructuring of our debt, we expect to result in significant improvements to our financial results, EBITDA and cash flow margins, as well as greatly improve the balance sheet of the combined company."

The merger creates a foundry business with revenues of approximately $440 million and pro forma TTM EBITDA of approximately $120 million, including the effects of an expected additional $40 million in annual cost saving synergies previously announced in conjunction with the merger.

The companies stress the merger creates significant cross-selling opportunities from Tower to Jazz customers and from Jazz to Tower customers.

Amelio co-founded Jazz Technologies (formerly Acquicor Technology) in 2005 and helped to lead the company through an initial public offering in 2006, its merger with Jazz Semiconductor, Inc. in 2007, and its deal with Tower.

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