Bermuda-based 3Dlabs Inc. Ltd. has announced that it has signed a definitive agreement with Creative Technology Ltd. to be acquired in a stock and cash transaction.

Subject to the terms and conditions, Creative will purchase 3Dlabs stock at $3.60 per share, with two-thirds being converted to Creative stock and one-third to cash, valuing the company at approximately $170 million.

The companies expect that the combination of 3Dlabs' technology and Creative's manufacturing, financial and distribution resources will enhance the development of 3Dlabs' planned products, which includes an anticipated re-entry into the volume desktop graphics market.

Creative, a shareholder of 3Dlabs, has enjoyed a close relationship with 3Dlabs since the company's inception in 1994. The two companies jointly launched the industry's first 3D gaming board in 1995 and enjoyed significant mutual success with the Permedia 2 family of graphics processors.

3Dlabs will continue to supply, support and develop all of its product lines, including Wildcat(R) and Oxygen(R), with no expected disruption in supply to any of its customers. 3Dlabs will also continue to supply and support its chip and IP products to its embedded customers and will carry on its industry-leading standardisation activities with OpenGL(R) 2.0, OpenML(TM) and embedded OpenGL in the Khronos Group and the Web3D Consortium.

Under the terms of the agreement, unanimously approved by boards of directors of both companies, 3Dlabs shareholders will receive $1.20 in cash and Creative ordinary shares with a value of $2.40 (such shares generally to be valued based on the average closing price on Nasdaq for the ten trading days ending on the fifth trading day prior to the 3Dlabs' shareholder meeting to approve the transaction) for each share of 3Dlabs. Closing of the transaction is subject to the approval of 3Dlabs shareholders, expiration of the US HSR antitrust waiting period and other customary closing conditions.