Interleave the letters in LUG and ONE and you get LOUNGE. Similarly:

SOT + PUS = SPOUTS
SHOE + COLD = SCHOOLED
CANES + HILT = CHAINLETS
CLIPS + ALOE = CALLIOPES
FETES + LENS = FLEETNESS
TINILY + RENAL = TRIENNIALLY

And three words can be merged to produce a fourth:

DOT + ERE + CAD = DECORATED
LET + ARE + CAD = LACERATED
LET + IRE + BAD = LIBERATED
MET + ORE + DAD = MODERATED
SAT + ERE + PAD = SEPARATED
SIR + ILL + MAY = SIMILARLY
TUT + ALE + BAD = TABULATED