Image source: Siliconware Precision Industries.

What: Shares of Advanced Semiconductor Engineering (ASX 0.48%) and Siliconware Precision Industries (NASDAQ: SPIL) surged on Thursday morning, thanks to a freshly announced merger between the two companies. ASE shares rose as much as 19.6% on the news, and Siliconware investors enjoyed an 11.2% surge at most.

So what: The two semiconductor testing and packaging companies will effectively merge under the new agreement.

Technically, they will establish a joint holding company based in Taiwan, where both of the companies have their current headquarters. This new entity will hold 100% of all ownership in the existing operations, and will then run the combined business in a hands-off fashion. Both of the current management teams will remain intact, running separate business operations under their current names.

Current ASE shareholders will be issued stock in the new holding company, while Siliconware investors are getting a cash buyout and no shares.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Now what: Siliconware has been fighting off ASE's advances in recent months, seeking outside investors to avoid the larger rival's buyout proposals. This final deal was approved by both boards of directors. What once was a hostile takeover attempt has turned into a negotiated merger on friendly terms, now set to close by June 25.

Overall, Siliconware shares have now gained about 20% since the beginning of ASE's interest. ASE shares came back from a recent slump today, and the stock has now beaten the S&P 500 benchmark across the same period -- by a small margin. ASE investors clearly saw this deal as important to the company's future, and today's big move amounts to a deep sigh of relief.