Siemens To Buy Mentor Graphics For $4.5 Bln Enterprise Value

(RTTNews) - German conglomerate Siemens AG (SIEGY, SMAWF) on Monday agreed to buy design automation and industrial software provider Mentor Graphics Corp. (MENT) for $37.25 per share in cash, which represents an enterprise value of $4.5 billion. For Siemens, the deal is part of its Vision 2020 to shape Digital Industrial Enterprise, and extends its Digital Enterprise Software portfolio.

The offer price represents a 21% premium to Mentor's closing price on November 11, the last trading day prior to the announcement. Mentor's Board of Directors approved the merger, and recommends the approval by shareholders. Mentor shareholder Elliott Management has committed to support the transaction.

Siemens expects to achieve synergies through a combination of revenue growth and anticipated margin expansion, with a total EBIT impact of over 100 million euros within 4 years from closing the transaction. In addition, the deal is expected to be earnings per share accretive within three years from closing.

Siemens expects to close the transaction in second quarter of calendar 2017, subject to customary closing conditions.

Following the deal closure, Mentor will be part of the Product Lifecycle Management or PLM software business of Siemens' DF Division.

Oregon -based Mentor, with over 5,700 employees in 32 countries, provides electronic hardware and software design solutions, products, and consulting services. The company reported revenues in the last fiscal year of approximately $1.18 billion with an adjusted operating margin of 20.2%.

According to Siemens, these attractive margins would continue in the future and would contribute significantly to the Product Lifecycle Management or PLM software business of Siemens Digital Factory Division, which Mentor will join.

Klaus Helmrich, member of the Managing Board of Siemens, said, "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."

Earlier, media reported about the impending deal, noting that the deal could be valued around $4.6 billion.

In September, PM Hedge fund Elliott Management, controlled by activist investor Paul Singer, boosted its stake in Mentor Graphics to 8.1 percent. At that time, the hedge fund asked the company's board to increase shareholder value and explore strategic alternatives, noting that the company is deeply undervalued. Elliott also said then that there are numerous operational opportunities, including enhancing operational efficiency and revenue quality, as well as strategic opportunities.

On October 10, Mentor Graphics announced the acquisition of Galaxy Semiconductor, a provider of test data analysis and defect reduction software for the semiconductor industry.

In Germany, Siemens shares were gaining 1.25 percent in the early morning trading at 109.50 euros.

Mentor shares settled at $30.68 on Friday, up 1.79 percent.