Siemens' Offer For Mentor Graphics A Positive For The Entire Electronic Design Space

Reuters reported that Siemens Software was close to entering into an agreement to acquire Mentor Graphics Corp (NASDAQ: MENT) in an all-cash deal that values the latter company at $4.5 billion–$4.6 billion.

Credit Suisse’s Farhan Ahmad maintains an Outperform rating on Mentor Graphics, with a price target of $34.

The Deal

“The news is not surprising given that it has been previously reported that MENT was exploring potential sale, and Siemens Software was mentioned among the potential acquirers,” Ahmad mentioned.

With this acquisition, Siemens would become a unique player in the digital industrial space, offering thermal, mechanical, electrical, electronic and embedded software design features on a single integrated platform.

EDA

The analyst believes the acquisition of Mentor Graphics also signals the rising importance of electronic design automation (EDA) in systems design and stated that regulatory risk to this deal was low, although there could be potential competing bids.

The acquisition would add to Siemens’ EPS within three years of the deal closing, while adding more than $18 million to the EBIT within four years.

Ahmad expects the transaction to be positive for Synopsys, Inc. (NASDAQ: SNPS), as well as smaller EDA companies, while lowering competition in Core EDA but increasing competition in systems design.

At last check, Mentor Graphics was up 18.56 percent at $36.38.

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