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Mentor Graphics & Siemens Deal Clears Regulatory Hurdle

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Reportedly, the pending acquisition of Mentor Graphics Corporation by Siemens announced in Nov 2016 for $4.5 billion has cleared a regulatory hurdle.

Mentor Graphics received a notice on Dec 22 from the Federal Trade Commission stating that the remaining waiting period associated with one of the antitrust regulations has been waived by the authorities. However, the meeting date for the same has not been decided yet.

The deal, which is expected to be completed by the second quarter of 2017, now requires approval from Mentor Graphics shareholders.

MENTOR GRAPHICS Price and Consensus

Acquisition Details

Siemens has agreed to pay $37.25 for every share of Mentor which generated revenues to the tune of $1.18 billion last year.

The acquisition is anticipated to bolster Siemens’ earnings within three years of completion of the deal.

Following the completion of the acquisition, Mentor Graphics will become a part of the Product Lifecycle Management software wing of Siemens that comes under the Digital Factory Division. Additionally, Mentor Graphics’ workforce of 1000 local employees and 5700 employees worldwide will be absorbed by Siemens.

As per an IDC report, worldwide spending on EDA is estimated to grow at a CAGR of 9.4% over the period of 2014 – 2019. Hence, this acquisition augurs well for Siemens and is likely to have a positive impact on the company’s top line going ahead.

Stock Performance Overview

Shares of Mentor Graphics have outperformed the broader Zacks Computer Integrated Systems industry over the last six months. While the industry generated a positive return of 17.0%, the stock returned a phenomenal 76.9%.

Zacks Rank and Key Picks

At present, Mentor Graphics carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology space are Anixter International Inc. , Amkor Technology, Inc. (AMKR - Free Report) and Broadcom Limited (AVGO - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, the consensus estimate for Anixter’s current year has remained stable at $4.84 over the last 60 days.

Similarly, the consensus estimate for Amkor’s current year has improved to 53 cents from 44 cents over the last 60 days.

Last but not the least, the consensus estimate for Broadcom’s current year has improved to $12.10 from $11.40 over the last 30 days.

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