Siemens AG (SIEGY) has announced reaching a deal to buy semiconductor-design software company Mentor Graphics Corp. (MENT) for $37.25 per share in cash, or roughly $4 billion. The complete deal values Mentor at about $4.5 billion, including debt. The deal represents a 21 percent premium to Mentor’s closing price on November 11, 2016, the last trading day prior to the announcement. Mentor shares surged 19 percent to $36.52 in pre-market trading before U.S. exchanges opened. Siemens rose 1.5 percent, extending the year’s gain to 22 percent.
Mentor’s Board of Directors has approved the merger agreement and has recommended the approval and adoption of the merger agreement to the company’s shareholders. Elliott Management, which disclosed a substantial stake in the company in September, has reportedly committed to support the transaction.
Mentor is the biggest acquisition announced by Siemens since its deal for Dresser-Rand Group Inc. for $7.6 billion two years ago. The transaction is subject to customary closing conditions and is expected to close in the second quarter 2017. Siemens expects the transaction to boost Siemens’s earnings before interest and taxes by more than $108 million within four years of closing and to be EPS accretive within three years from closing.
Siemens’s digital factory unit will house Mentor after the deal closes. Mentor is currently headquartered in Wilsonville, Oregon, and has over 5,700 employees in 32 countries worldwide. Mentor serves over 14,000 global accounts and is viewed as a global leader in electronic systems design and automotive electronics. In its fiscal year ended January 31, 2016, Mentor generated revenue of approximately $1.2 billion. The company reported a loss of $10 million in the six months ended July 31, compared with profit of $21 million in the same period of last year.
Klaus Helmrich, member of the Managing Board of Siemens, said of the transaction, “With Mentor, we’re acquiring an established technology leader with a talented employee base that will allow us to supplement our world-class industrial software portfolio. It will complement our strong offering in mechanics and software with design, test and simulation of electrical and electronic systems.”
Walden C. Rhines, chairman and CEO of Mentor, said in a statement, “Siemens is an ideal partner with financial depth and stability, and their resources and additional investment will allow us to innovate even faster and accelerate our vision of creating top-to-bottom automated design solutions for electronic systems.”