Siemens AG agreed to buy Mentor Graphics Corp. for $4.5 billion in its biggest acquisition since 2014 as the German engineering company extends its industrial software capability.
Siemens will pay $37.25 a share in cash for Wilsonville, Oregon-based Mentor, the industrial giant said in a statement on Monday. That’s 21 percent above the closing price on Friday. Elliott Management Corp., which owns 8.1 percent of Mentor’s shares, backs the offer, Siemens said.
The deal follows Siemens’s $970 million January purchase of U.S. computer-program maker CD-adapco of the U.S. as Chief Executive Officer Joe Kaeser seeks to grow the digital business as part of a retreat from consumer-oriented products to focus on industrial applications. Mentor is the biggest acquisition announced by the Munich-based company since it agreed to buy Dresser-Rand Group Inc. for $7.6 billion. For its part, Mentor was under pressure to increase shareholder value from activist investor Elliott, which doubled its stake in September.
“The footprint of Mentor Graphics will allow us to reach a lot more customers,” Siemens software executive Chuck Grindstaff said on a conference call. “This offers a unique opportunity to design products in a more holistic way.”
The asset is a perfect fit and will set the pace in the industry, Siemens Chief Financial Officer Ralf Thomas said on the call, adding that there will be some job cuts resulting from the combination. Cost savings of more than 100 million euros ($108 million) per year are expected by the fourth year of ownership, Thomas said.
Mentor shares surged 19 percent to $36.47 in trading before U.S. exchanges opened. Siemens rose 0.9 percent to 109.15 euros as of 2:12 p.m. in Frankfurt, extending the year’s gain to 21 percent.
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SOURCE: Bloomberg, Liezel Hill