* Cash-and-stock deal valued at $85 million

* Excludes Audience's cash balance of $44 million

* Knowles expects to save $25 mln annually

* Deal to add to earnings in Q4 of 2016 (Adds analyst comment, details; Updates share)

By Lehar Maan

April 30 (Reuters) - Audio-chip maker Audience Inc, which has struggled since losing Apple Inc as its No. 1 customer in 2012, agreed to a distress sale to hearing-aid component maker Knowles Corp in a cash-and-stock deal valued at $85 million.

Audience said on Thursday its survival as a standalone company would be in doubt without a capital injection.

Knowles, which supplies microphones to Apple, will pay $2.50 in cash and $2.50 in stock for each Audience share - a discount of 9 percent to Audience's close on Wednesday.

Audience's shares fell as much as 18 percent to $4.50, while Knowles shares dropped as much as 6 percent to $18.75.

"Knowles has struggled to execute on its own, and this deal if anything will only dilute their concentration to some degree," said Stephens Inc analyst Harsh Kumar.

Itasca, Illinois-based Knowles has reported a loss for the last four quarters, in part due to defects found in the latest version of the microphones it supplies to Apple.

Audience, based in Apple's hometown of Mountain View, California, said it was facing "material declines in forecast demand" from a big customer, which it did not identify.

Since losing Apple as a customer, Audience has depended on Samsung Electronics Co Ltd for most of its business.

"The impact of this forecast change is to dramatically erode projected operating results for 2015 as well as our projected cash balances, and to introduce concerns about our ability to continue as a standalone entity without additional capital," Audience CEO Peter Santos said in a statement.

The deal excludes Audience's cash balance of $44 million.

Audience reported revenue of $113.3 million in 2014, making it a relatively small player in the global smartphone supply chain.

Knowles, which has a market value of about $1.7 billion, said it expected to save about $25 million on an annual basis after the deal closes, with the acquisition adding to earnings by the fourth quarter of 2016.

J.P. Morgan Securities LLC is financial adviser to Knowles, while Sidley Austin is legal counsel. Deutsche Bank Securities Inc is financial adviser to Audience and Wilson Sonsini Goodrich & Rosati PC is legal adviser.

(Reporting by Supantha Mukherjee and Lehar Maan in Bengaluru; Editing by Savio D'Souza and Ted Kerr)