SAN JOSE -- Two of the largest EMS firms in the world will join forces as No. 2 Flextronics International this morning announced it would acquire No. 3 Solectron Corp. for $3.6 billion in cash and stock.

The combined company will have about 200,000 employees and annual revenue of more than $30 billion, ahead of the current market leader, Hon Hai (Foxconn).

The companies will held a conference call Monday to discuss the deal. The call may be accessed by logging on to the Investor's section at flextronics.com. 
Both companies' boards have approved the deal, which is scheduled to close by year-end. Following the acquisition, Solectron will become a wholly-owned unit of Flextronics, and Solectron shareholders will own 20% to 26% of Flextronics' outstanding shares.

Milpitas, CA-based Solectron reported net income of $133 million on revenues of $10.6 billion for its fiscal year ended Aug. 25, 2006. The company employs about 45,000 workers worldwide. The $3.6 billion purchase price means Flextronics is acquiring Solectron at roughly one-third its annual sales.

Flextronics said the combined entity could cut costs by up to $200 million.

Although Flextronics has absorbed large companies before -- including Nortel's manufacturing arm -- the company allowed that the integration could take up to two years.

"This should be at least 15% accretive to Flextronics' earnings per share once all of the synergies are realized," Flextronics CFO Thomas Smach said in a statement.

Separately, Solectron announced the opening of an aftermarket repair services and product fulfillment facility in Plzen, Czech Republic.