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Cadence (CDNS) to Expand Its Portfolio With BETA CAE Acquisition
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Cadence Design Systems (CDNS - Free Report) announced its plan to acquire a leading provider of engineering simulation solutions — BETA CAE Systems International AG. The acquisition will likely enhance Cadence's Intelligent System Design strategy by broadening its range of multiphysics system analysis offerings and helping Cadence enter into the structural analysis sector.
The deal involves Cadence paying approximately $1.24 billion, with 60% of the consideration in cash and 40% to be paid through the issue of Cadence stock to BETA CAE shareholders. Cadence anticipates securing fresh debt financing to pay for a portion of the purchase price cash component. In addition to continuing share repurchases, Cadence intends to quickly pay off the debt taken to finance the deal using free cash flow from its ongoing activities.
BETA CAE offers a comprehensive platform that supports mechanical/structural, CFD, and EM simulations, as well as the full simulation and analysis flow for multiphysics system simulations. Its flagship products include ANSA and META. BETA CAE is renowned for its unique simulation software and services, particularly in the automotive sector. BETA CAE’s products complement Cadence’s multiphysics system analysis portfolio.
Multiphysics simulations are becoming important early in the design cycle due to growing system complexity and time-to-market challenges, which are driven by accelerated mechanical and electrical hyperconvergence and the digital revolution of numerous industries.
The deal is expected to close in the second quarter of 2024, subject to regulatory approvals. BETA CAE has approximately $90 million in annual revenues, which is projected to contribute around $40 million to Cadence's 2024 revenues.
However, the acquisition is expected to dilute Cadence's 2024 earnings per share (EPS) by approximately 12 cents. The company anticipates the deal to become accretive in 2025, based on Cadence's debt repayment and share repurchase strategies.
Cadence has expanded its system analysis portfolio over recent years through organic innovation and acquisitions, incorporating electromagnetics, electrothermal, and computational fluid dynamics solutions. The company is focusing on providing end-to-end solutions, which rapidly reduces the time required to introduce a semiconductor product in the market.
In January, the company acquired California-based embedded software and system-level solutions provider Invecas, Inc. Invecas buyout adds a skilled engineering team (based in Hyderabad, India), which will aid Cadence in offering its customers with custom solutions across chip design, advanced packaging, product engineering and embedded software.
Apart from Invecas, it also acquired Intrinsix to expand Cadence’s footprint in the advanced nodes, radio frequency, mixed signal and security algorithms’ space. The buyouts of Pointwise and NUMECA were also aimed at increasing the system analysis portfolio with more CFD solutions.
CDNS currently sports a Zacks Rank #1 (Strong Buy). In the past year, the stock has gained 56.9% compared with the Zacks sub-industry’s growth of 53.1%.
The Zacks Consensus Estimate for Synopsys’ 2024 EPS has improved 1.1% in the past 60 days to $13.56. SNPS’ long-term earnings growth rate is 17.5%.
Synopsys’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 4.1%. Shares of SNPS have risen 56.1% in the past year.
The Zacks Consensus Estimate for Woodward’s fiscal 2024 EPS has inched up 5.7% in the past 60 days to $5.27. WWD’s long-term earnings growth rate is 15.5%.
Woodward’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 27.2%. Shares of WWD have risen 50.5% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies’ fiscal 2024 EPS has improved 2.5% in the past 60 days to $8.54. WTS’ long-term earnings growth rate is 7.8%.
WTS’ earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 13.5%. Shares of WTS have risen 16.5% in the past year.
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Cadence (CDNS) to Expand Its Portfolio With BETA CAE Acquisition
Cadence Design Systems (CDNS - Free Report) announced its plan to acquire a leading provider of engineering simulation solutions — BETA CAE Systems International AG. The acquisition will likely enhance Cadence's Intelligent System Design strategy by broadening its range of multiphysics system analysis offerings and helping Cadence enter into the structural analysis sector.
The deal involves Cadence paying approximately $1.24 billion, with 60% of the consideration in cash and 40% to be paid through the issue of Cadence stock to BETA CAE shareholders. Cadence anticipates securing fresh debt financing to pay for a portion of the purchase price cash component. In addition to continuing share repurchases, Cadence intends to quickly pay off the debt taken to finance the deal using free cash flow from its ongoing activities.
BETA CAE offers a comprehensive platform that supports mechanical/structural, CFD, and EM simulations, as well as the full simulation and analysis flow for multiphysics system simulations. Its flagship products include ANSA and META. BETA CAE is renowned for its unique simulation software and services, particularly in the automotive sector. BETA CAE’s products complement Cadence’s multiphysics system analysis portfolio.
Cadence Design Systems, Inc. Price and Consensus
Cadence Design Systems, Inc. price-consensus-chart | Cadence Design Systems, Inc. Quote
Multiphysics simulations are becoming important early in the design cycle due to growing system complexity and time-to-market challenges, which are driven by accelerated mechanical and electrical hyperconvergence and the digital revolution of numerous industries.
The deal is expected to close in the second quarter of 2024, subject to regulatory approvals. BETA CAE has approximately $90 million in annual revenues, which is projected to contribute around $40 million to Cadence's 2024 revenues.
However, the acquisition is expected to dilute Cadence's 2024 earnings per share (EPS) by approximately 12 cents. The company anticipates the deal to become accretive in 2025, based on Cadence's debt repayment and share repurchase strategies.
Cadence has expanded its system analysis portfolio over recent years through organic innovation and acquisitions, incorporating electromagnetics, electrothermal, and computational fluid dynamics solutions. The company is focusing on providing end-to-end solutions, which rapidly reduces the time required to introduce a semiconductor product in the market.
In January, the company acquired California-based embedded software and system-level solutions provider Invecas, Inc. Invecas buyout adds a skilled engineering team (based in Hyderabad, India), which will aid Cadence in offering its customers with custom solutions across chip design, advanced packaging, product engineering and embedded software.
Apart from Invecas, it also acquired Intrinsix to expand Cadence’s footprint in the advanced nodes, radio frequency, mixed signal and security algorithms’ space. The buyouts of Pointwise and NUMECA were also aimed at increasing the system analysis portfolio with more CFD solutions.
CDNS currently sports a Zacks Rank #1 (Strong Buy). In the past year, the stock has gained 56.9% compared with the Zacks sub-industry’s growth of 53.1%.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks from the broader technology space are Synopsys (SNPS - Free Report) , Woodward (WWD - Free Report) and Watts Water Technologies (WTS - Free Report) . Synopsys sports a Zacks Rank #1, while Watts Water Technologies and Woodward carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Synopsys’ 2024 EPS has improved 1.1% in the past 60 days to $13.56. SNPS’ long-term earnings growth rate is 17.5%.
Synopsys’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 4.1%. Shares of SNPS have risen 56.1% in the past year.
The Zacks Consensus Estimate for Woodward’s fiscal 2024 EPS has inched up 5.7% in the past 60 days to $5.27. WWD’s long-term earnings growth rate is 15.5%.
Woodward’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 27.2%. Shares of WWD have risen 50.5% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies’ fiscal 2024 EPS has improved 2.5% in the past 60 days to $8.54. WTS’ long-term earnings growth rate is 7.8%.
WTS’ earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 13.5%. Shares of WTS have risen 16.5% in the past year.