SAN FRANCISCO—EDA and IP vendor Synopsys Inc. said Wednesday (Nov. 30) it signed a definitive agreement to acquire rival EDA vendor Magma Design Automation Inc. in a deal worth about $507 million.
Synopsys (Mountain View, Calif.) said it plans to pay $7.35 for each share of Magma. Synopsys said it plans to fund the deal with a combination of cash and debt.
The deal, which is expected to close in the second quarter of 2012, would be the biggest acquisition in EDA in years. It would also bring together competitors who have traditionally been fierce rivals.
In the 2000s, Synopsys and Magma fought a long running legal battle over allegations that a co-founder of Magma conceived of technology that unpinned Magma's products while working at Synopsys. The suit, which culminated with a trial in 2006, was settled in 2007.
Aart de Geus, Synopsys' chairman and CEO, said the companies' past legal wrangling is water under the bridge. He noted that EDA and the semiconductor industry in general area areas where change is constant and rapid. "Stuff happens," de Geus said. "We look forward. It's all about one thing: what can we do to make the customer successful."
"It's a great deal for Synopsys," said Gary Smith, chief analyst at Gary Smith EDA. Smith said the deal makes sense for Synopsys because while Synopsys' analog custom IC EDA effort has not really taken off, Magma's has. "That's the big grab [for Synopys]," Smith said.
But de Geus said Synopsys was not motivated by Magma's strength in any one particular product area. Instead, de Geus said Synopsys sees the Magma acquisition as an opportunity to expand its R&D talent pool.
The deal remains subject to closing conditions, including the approval of both companies' shareholders. De Geus indicated that no decisions about product support have been made, but suggested Synopsys' primary focus would be on customers.
John Chilton, senior vice president of marketing and strategic development, said Synopsys would not discontinue any Magma products at the time of the deal closing. Instead, Chilton said, Synopsys would sit with customers and the combined product roadmap of both companies to determine what products were needed and how to move forward.
Also Wednesday, Synopsys reported sales and profit in line with analysts' expectations for the quarter ended Oct. 31. Sales in the quarter rose to $390.5 million, up 1 percent compared to the previous quarter and up 4 percent compared with the year-ago quarter, Synopsys said. The company report a net income in accordance with generally accepted accounting principles (GAAP) of $39.9 million, or 27 cents per share, down 23 percent from the previous quarter and up 57 percent compared with the year-ago quarter.
On a non-GAAP basis, excluding charges, Synopsys reported a net income for the quarter of $65.3 million, or 45 cents per sahre, down from a non-GAAP net income of $68.1 million in the previous quarter and up from a non-GAAP net income of $59.9 million in the year ago quarter.
Synopsys' fiscal fourth quarter results were in line with consensus analysts' expectations of $390.1 million in sales and non-GAAP earnings of 45 cents per share, according to Yahoo Finance.
For the fiscal year, which also closed Oct. 31, Synopsys reported sales of $1.54 billion, up 11 percent from 2010. The company report a GAAP net income for the year of $221.4 million, or $1.47 per share, down from $237.1 million in fiscal 2010.
For the current quarter, Synopsys said it expects sales to increase to between $412 million and $420 million. The company said it expects to report GAAP earnings of 33 to 38 cents per share for the quarter.
For fiscal 2012, Synopsys said it expects sales to increase to between $1.64 billion and $1.67 billion, with GAAP earnings of $1.28 to $1.44 per share.
@yalanand - I used HFSS for antenna design. Another guy 2 cubes over is using the former Apache stuff for chip integrity analysis. Ansys is pretty close to Cadence or Mentor in size, but also does mechanical analysis It seems like they have really bulked up on the electronics and semiconductor side with the addition of Ansoft and Apache.
@goafrit, I am not sure if you have used MAGMA tools, but I have been using MAGMA tools from last 4 years and I am pretty happy with those tools especially P&R tools. Although cadence Encounter is giving tough competition to Magma but Magma is preferred for bigger design's.
There is the possibility that the Board overruled Rajeev because the deal was too good to pass on, much like what happened last week at American Airlines when they went for Chapter 11 bankruptcy protection (Gerard Arpy 'retired' as a result). We'll see if any more news and rumors shake out of this.
Dylan is right - there isnt going to be any merger between Cadence and Mentor. Wally Rhines was here in Bangalore for the Mentor user conference and he just laughed off the idea of a Cadence-Mentor merger when I asked him about it. He said, "why should I feel any pressure on this - Magma is so much smaller and we are going to be a $1 billion company, there is no pressure. And, regarding the Synopsys_Magma issue -he quipped, " I frankly cannot understand why it happened, you should ask Art and tell me about it.
This should actually open up the opportunity for some of the other smaller companies offering P&R. Once the two companies are deep into their integration phase and internal politics, the innovators have a chance to compete on a more level playing field. Last I looked their were about 20 other players.
"this acquisition would leave Synopsys as the dominant solution for P&R, timing and DRC tools."
Cadence Encounter is no slouch on P&R and timing analysis, and many engineers swear by Mentor Calibre for DRC.
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