WILSONVILLE, Ore. Mentor Graphics Corp. has made a $14 per share cash offer for Quickturn Design Systems Inc. (San Jose, Calif.). The move alters Mentor's hostile takeover attempt for Quickturn, and serves as a counteroffer to Cadence Design Systems Inc.'s earlier acquisition attempt of Quickturn for $14 per share in a stock transaction. Mentor's offer is for up to 2.1 million shares of Quickturn.
Mentor's latest plan is to snare 14.9 percent of Quickturn shares just under the 15 percent that would trigger a "poison pill" defense by Quickturn and then to negotiate with Quickturn for the rest. This process will be much easier if Mentor's director slate is elected at a Quickturn shareholders' meeting scheduled for Jan. 8. "We're tending for 14.9 percent and then we expect to have a negotiated transaction for the rest following the Jan. 8 meeting," said Wally Rhines president and chief executive officer of Mentor (Wilsonville, Ore.).
The latest offer supersedes Mentor's previous $12.125 per share offer for all of Quickturn's shares, but does not alter the timing or scope of the Jan. 8 meeting of Quickturn shareholder's, at which stockholders will vote on a board of directors backed by Mentor.
Quickturn, which embraced the Cadence stock transaction offer and has been bitterly fighting Mentor, today (Dec. 30) urged its shareholders to reject Mentor's offer. Keith Lobo, president and chief executive officer of Quickturn, called the Mentor offer an "illusory proposal" that does not represent a real offer to purchase the entire Quickturn.
Rhines said the new offer is actually more aggressive than the $12.125 per share bid because it is not dependent on the election of a new board or the removal of Quickturn's poison-pill provisions, which Mentor is fighting in the Delaware courts.
Quickturn and Cadence have argued that Cadence's $14 stock offer is a better deal than the Mentor offer because it's tax-free. But Rhines retorted that "cash today is always worth more than stock in the future." He also speculated that antitrust concerns could delay a Cadence acquisition of Quickturn.
While the Jan. 8 meeting has been cast as a Mentor-versus-Cadence referendum, Rhines said that both supporters of a Mentor or of a Cadence acquisition of Quickturn should vote for the Mentor-backed slate of directors. He said that no one on this slate has any financial interest in Mentor, and that the new board of directors will be expected to auction Quickturn to the highest bidder, be it Mentor or Cadence.
Meanwhile, Mentor is going directly to Quickturn shareholders with its $14 per share cash offer. If more than 2.1 million shares are tendered, Mentor will "fair share allocate" its purchases among the shareholders. Tendering a share to Mentor's offer does not commit that share to voting for Mentor's slate in the Jan. 8 meeting.
Mentor currently owns roughly 3 percent of Quickturn stock, and is thus seeking to purchase just under 12 percent of the remaining outstanding stock to obtain a total of 14.9 percent.
Even if Mentor's slate is elected, and 14.9 percent of Quickturn's shares are tendered, another obstacle remains the over $17 million in breakup fees that will be due Cadence if its merger doesn't go through. Mentor is challenging this and other provisions of the Cadence-Quickturn merger agreement in court.