Cadence Design Systems Inc has pulled the rug out from under hostile bidder Mentor Graphics Corp by agreeing to acquire Quickturn Design Systems Inc for $253m. Electronic design software and services company Cadence and Quickturn, which makes hardware emulation systems to test semiconductor designs, said their boards have unanimously approved a merger deal which will see Cadence become a white knight for the besieged company. Cadence will acquire Quickturn in an all-stock transaction that values it at $14 per share – a premium of more than 15% over Mentor’s hostile bid of $12.125 per share, or about $216m in total. Cadence feels that the integration of Quickturn’s hardware-based emulation approach with its software design and simulation systems will vastly improve its ability to meet customer demand for faster development of high-speed systems-on- a-chip. The deal could end for Quickturn what has become an ugly struggle with Mentor, which launched its unsolicited tender offer in August and has extended it several times. Mentor claims to have been tendered 53% of the outstanding shares, in addition to the 3% stake it already owns, despite continued pleas from Quickturn’s board for an outright rejection of the offer. The takeover attempt also resulted in an ongoing tangle of litigation between the two companies in a Delaware court, with Quickturn trying to have the offer declared illegal and Mentor attempting to remove Quickturn’s poison pill takeover defense. Cadence maintains that the Mentor takeover attempt wasn’t a motivation in the acquisition, but instead simply brought Quickturn closer to its attention, leading the company to question What are we missing? according to a spokesperson. Upon deeper inspection of Quickturn, Cadence felt that its technology had evolved significantly over the past couple of years and was perfectly complementary to its own offerings. Cadence does admit, however, that the Mentor situation did put a time constraint on the negotiations, which were only begun recently. Cadence’s admiration for Quickturn’s technology is in sharp contrast to the view of Mentor which, even as it tried desperately to acquire the company, denigrated Quickturn’s products, saying it was mainly interested in its infrastructure and personnel. The deal, which will make Quickturn a wholly-owned subsidiary of Cadence and will be accounted for as tax-free pooling of interests, is expected to close in the first quarter of 1999. Cadence insists that, while it can’t anticipate Mentor’s next move, it fully expects the deal to go through without any major problems. From a regulatory standpoint, Cadence says, the two have no product overlap and a 100% overlap in customer base. Mentor, for its part, says it is considering its options with regard to the situation and would not comment further until it has determined what those options are.
