Dialog said there were 61.9 percent votes cast in favour of the deal at the extraordinary shareholder meeting, where shareholders representing 54.3 percent of Dialog's total share capital were present.

Activist hedge fund Elliott, which owns 5 percent of Dialog shares, earlier this month called upon shareholders to vote against the deal, saying it would destroy value.

Elliott has made big returns in Germany from stakes in groups such as drug wholesaler Celesio and cable group Kabel Deutschland during M&A situations. But on Dialog's Atmel deal it has conceded defeat for now.

"We believe it is now incumbent on Dialog management to deliver on its assertion that this is a value creative transaction," the investor said in a statement.

Elliott had said earlier Dialog had agreed to pay a 92 percent premium to fair value for an underperforming asset and that consummation of the transaction would destroy approximately $500 million of value for Dialog shareholders.

Atmel shareholders will not vote on the deal until late March.

Dialog makes power management chips used in mobile phones, which make up 80 percent of its sales. Most of its business comes from just two customers Apple and Samsung Electronics.

It has said Atmel helps it to diversify into automotive and security markets as well as network-connected chips used in industrial gear, or what is known as the "Internet of Things".

"It is critical for us to position ourselves in the next stage of growth in the industry beyond our strong position in mobile, to get into these smart connected devices," Dialog's Chief Executive Jalal Bagherli told Reuters following the vote.

He has said previously that he expects to have regulatory approval for the deal by the end of January.

Bagherli said he spent the last few weeks meeting investors to help them understand the merits of the deal in terms of diversification, cost-savings and growth. He said he was pleased to see most investors back his line of thinking.

"With this deal we are not ditching our heritage in mobile," Bagherli told investors at a Morgan Stanley investor conference last week. "We are adding another layer of growth (that) halves our dependence on one very large (mobile) segment."

(Additional reporting by Alexander Huebner, Harro ten Wolde and Eric Auchard in Frankfurt. Editing by Jane Merriman)

By Paul Sandle and Arno Schuetze

Stocks treated in this article : Atmel Corporation, Dialog Semiconductor PLC