UK-headquartered Dialog Semiconductor confirmed tonight that it is in merger talks with US-listed Synaptics Incorporated in what would create a multi-billion dollar business.

Dialog, which is listed in Frankfurt but headquartered in Reading, said in a statement it had decided to “proceed with due diligence and detailed discussions in connection with a potential acquisition of Synaptics”.

Read more: Dialog Semiconductor brushes off fears it could be dropped by Apple

It said a deal would “accelerate its growth in internet of things and enhance its position in the mobile market”.

Synaptics also confirmed the talks but said there was “no assurance that a transaction will result from these discussions” and that any deal would be subject to regulatory and shareholder approval.

The merger talks between the pair were first reported by Bloomberg on 8 June.

Dialog has a market value of about €1.15bn (£1bn) while Synaptics is valued at $1.6bn (£1.2bn).

Synaptics' shares soared by 10 per cent in after hours trading tonight following the announcement, having risen by as much as 15 percent following the original Bloomberg story.

Read more: This UK-based chipmaker has acquired a US tech firm for $306m

Dialog has faced shareholder disquiet over the last year after its biggest customer Apple reduced orders for its power-management chips used in the iPhone.

Apple has agreed to use its chips until at least 2020 but shareholders fear that Apple could move to create its own chips and stop ordering from the firm.

In November 2017 Dialog's shares were trading at more than €40, they have since fallen to just above €15.