Quickie: Siemens snaps up Mentor Graphics

Nov 14, 2016 | Hot Topics

A couple of weeks ago, news broke that Mentor Graphics was “exploring options” — and the speculation started about who would acquire the maker of EDA and simulation software. (Recall that they acquired FloEFD maybe 10 years ago.) Well, now we know: Siemens.

Siemens just issued a press release which says:

  • Siemens will acquire Mentor for $37.25 per share in cash, which represents an enterprise value of $4.5 billion. The offer price represents a
    21% premium to Mentor’s closing price on November 11, 2016.
  • Mentor’s Board of Directors have approved the merger agreement.
  • Mentor shareholder (and frequent PLMish activist investor) Elliott Management has committed to support the transaction.
  • This extends “Siemens’ leading Digital Enterprise Software portfolio with Mentor’s well established electronics IC and systems design, simulation and manufacturing solutions. These capabilities are essential for today’s smart connected products such as autonomous vehicles. The combination provides mechanical, thermal, electronic and embedded software tools which will allow Siemens’ customers to further accelerate their innovation, drive production efficiencies and optimize the operation of their products in the field. Now, for the first time, quality, efficiency, flexibility, safety and speed can be optimized across technical domains, throughout the entire lifecycle and for the entire extended enterprise.”
  • Klaus Helmrich, member of the Managing Board of Siemens. is quoted as saying, “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.”
  • As with all of these deals, “Siemens expects to achieve synergies through a combination of revenue growth and anticipated margin expansion, with a total EBIT impact of over €100 million within 4 years from closing the transaction.”
  • Closing of the transaction is subject to customary closing conditions and is expected in Q2 of calendar 2017.

Mentor will become part of the PLM division.

More on this after I’ve had a chance to think about it — but, on first glance, I think this makes sense. Our world doesn’t separate the electronic from the mechanical as much as it used to and the ability to design the chip or board as you design the phone or car makes an incredible amount of sense. From Siemens’ perspective, it adds a large software business to the fold, bringing with it those nice fat software profit margins. Siemens investors like the deal, sending the share price up just under 2% as I write this (6AM ET).