Synopsys to Buy Synplicity

SAN FRANCISCO - Mountain View, Calif.-based Synopsys(SNPS Quote) gave shareholders of Synplicity(SYNP Quote) a payday with a premium buyout price Thursday.

Synopsys's cash offer of $227 million, or $8 a share, for Synplicity constitutes a 50% premium to Thursday's closing price. Including cash acquired, Synopsys will pay about $188 million. The boards of both companies have signed off on the deal, according to a spokesperson. Shareholders and regulators must also approve it for the deal to close in the second quarter.

Synplicity shares were up $2.38, or 44.8%, to $7.70 in recent after-hours trading. The stock had recently fallen off an October high of $7 to trade below $4.50 after Synplicity's fourth-quarter earnings report in February. But Synplicity had already recovered some of its value, ending Thursday at $5.32.

Synopsys expects the deal to dilute earnings until 2009, but said its earnings guidance for 2008 remains unchanged. The company recently raised EPS guidance to a range of $1.56 to $1.61.

Both companies develop design software for makers of semiconductors. Synplicity's shares have fallen in recent months. The sector has been hit by the economic downturn, with chip sales forecast to slow this year.

Sunnyvale, Calif.-based Synplicity will bring to Synopsys tools for designing programmable chips, known as field programmable gate arrays, as well as other technology, according to Synopsys. Synplicity's tools will help Synopsys' electronics clients more quickly design microprocessors with complex software programmed in.

Synopsys had nearly $1 billion in cash and equivalents on its balance sheet at the end of fiscal 2007. "In this financial environment, having $1 billion allows us to have dry gunpowder" to act quickly when acquisition opportunities arise, CFO Brian Beattie said on that earnings conference call in December.

Synplicity had revenue of $71.2 million in 2007 and EPS, less items, of 34 cents.

Synopsys' shares had fallen 22% since mid-October. The stock was up a penny to $21.79 in after-hours trading.

Shares of competitors Cadence Design Systems(CDNS Quote) and Mentor Graphics(MENT Quote) have also suffered, falling 50% and 45% respectively since mid-October.

Synplicity CEO Gary Meyers and co-founder and Chief Technical Officer Ken McElvain will join Synopsys.