NEW YORK ( TheStreet) -- Magma Design Automation (LAVA) soared on heavy volume Thursday after the San Jose, Calif.-based software company agreed to be acquired by Synopsys (SNPS - Get Report) for $7.35 a share.
The consideration is a 28.5% premium to Magma Design's closing price on Wednesday of $5.72 per share, and a 40% premium to the stock's 50-day moving average of $5.25 per share. At the same time, it's also a discount to the stock's 52-week high of $8.50 reached on July 7.
Synopsys, which announced the agreement after the market close on Wednesday, said the transaction is worth roughly $507 million, net of cash and assumed debt.
Shares of Magma Design, whose products are used to design semiconductors and other electronic products, are up $1.42, or 24.8%, to $7.14 in midday action on volume of 39.2 million, far eclipsing the issue's trailing three-month daily volume of less than 800,000. The stock was the second most-active issue on the Nasdaq Stock Market, just behind Sirius XM Radio (SIRI) at 40.3 million.The deal values Magma Design at 19 times the current forward consensus estimate for earnings of 39 cents a share in the company's fiscal year ending in April. "Magma and Synopsys have always shared a common goal of enabling chip designers to improve performance, area and power while reducing turnaround time and costs on complex ICs," said Rajeev Madhavan, CEO of Magma, in a press release. "By joining forces now we can ensure that chip designers have access to the advanced technology they need for silicon success at 28, 20 nanometer and below." Synopsys stressed the complementary nature of the deal in its announcement and said it expects the transaction to close in the calendar second quarter of 2012, assuming it passes muster with shareholders and regulators. Synopsys plans to fund the deal through a combination of cash and debt and said it would announce further details upon the transaction's completion. "The dramatic rise in complexity of today's semiconductor designs for all process nodes requires an equally dramatic increase in designer productivity," said Aart de Geus, the chairman and CEO of Synopsys, in a statement, adding later: "This acquisition will enable Synopsys to accelerate the delivery of the technology our customers need to keep the overall cost of design in check."