SANTA CRUZ, Calif. -- Faced with a declining stock price following its offer to purchase embedded memory provider MoSys for $432 million in stock and cash, Synopsys Inc. has switched to a $13.50 per share all-cash offer. Synopsys is meanwhile borrowing $250 million to help offset the costs of the acquisition.
Synopsys announced its intent to acquire MoSys in February. The announcement was immediately controversial, given the very high premium that Synopsys offered, and skepticism from some observers about whether embedded memory intellectual property (IP) belongs in an EDA portfolio.
Synopsys' stock took a 13 percent hit the day following the February announcement. That reduction in stock price is what led Synopsys to modify its original stock-and-cash offer, said Jessica Kourakos, vice president of investor relations at Synopsys. While Synopsys stock was trading around $35 before the original offer was announced, it's now around $28, she noted.
"At $28 per share, we would have to issue more shares in the market to match the agreed upon transaction value. It's less dilutive in 2004 and more accretive in 2005 to earnings per share if we don't have to issue additional shares in the market," she said.
While the value of the transaction doesn't change, Kourakis noted that because MoSys has around $80 million cash on hand, the overall deal "net of cash" is around $350 million.
Meanwhile, Synopsys announced that it has executed a commitment letter with an unspecified financial institution for a $250 million line of credit. Most is for the MoSys acquisition, but the overall idea is to gain more flexibility with cash, Kourakis said. As reported in its first quarter earnings release, Synopsys had cash and cash equivalents of approximately $413 million as of January 31, 2004.
Synopsys' tender offer for MoSys expires April 16 unless extended. The MoSys board of directors has unanimously recommended that shareholders tender their shares.