By Stephen Nellis and Arsheeya Bajwa
(Reuters) -Cadence Design Systems will buy BETA CAE (NYSE:CAE) Systems International AG, which makes software for analyzing car and jet engine designs, for $1.24 billion in cash and stock, Cadence said on Tuesday.
California-based Cadence, whose shares fell more than 3%, will pay about $744 million in cash and the rest in stock. The company said it will take on debt to pay for the deal but will pay that down with cash generated from operations.
One of the largest makers of software used in designing computer chips, Cadence helps chipmakers decide where to place billions of transistors to form complex circuits. But over the past six years, it has been moving into design software for the larger physical systems from circuit boards to airplanes. Last month, the company announced a supercomputer designed to help simulate how air flows around jet engines, among other uses.
The BETA CAE deal continues that trend. Its software is widely used to analyze designs in automotive and aerospace industries, with customers such as Honda Motor Co (NYSE:HMC), General Motors (NYSE:GM) and Lockheed Martin (NYSE:LMT).
The Cadence deal announced on Tuesday comes after the firm's largest rival, Synopsys (NASDAQ:SNPS), said it will spend $35 billion to buy Ansys (NASDAQ:ANSS), another maker of physical analysis software.
"This also advances a portfolio that may match up against a Synopsys-Ansys combination at some future point," said Joe Vruwink, a senior analyst at Baird Equity Research.
The BETA CAE deal is expected to close in the second quarter of the year and Cadence expects BETA CAE to contribute about $40 million to its 2024 revenue, Cadence said in a statement.