Flextronics plans to capture rival Solectron for $3.6bn in stock and cash.

Flextronics and Solectron construct a diverse range of products from computing systems such as the Xbox and high-end servers to medical devices. So, the proposed tie-up between the two companies means that a wide variety of hardware makers who prefer not to make their own hardware will have one less option. The combined company - say, FlexSol - would bring in more than $30bn per year.

According to a regulatory filing, Solectron shareholders can choose between receiving .35 of a share of Flextronics stock per Solectron share or a cash payment of $3.89 per Solectron share. This arrangement hinges on the condition that no more than 70 per cent and no less than 50 per cent of the Solectron shares will be exchanged for Flextronics shares.

Both company boards have approved the deal, which still hinges on standard approvals.

Flextronics has pitched the acquisition as a way to cut costs and expand its product line. In particular, Singapore-based Flextronics hopes to get its mitts on Silicon Valley-based Solectron's computing and telcoms gear production skills.

The addition of the back-end hardware should complement Flextronics's expertise with consumer electronics and mobile devices.

The companies expect the deal to close by the end of 2007. ®