What Happened: Shares of engineering simulation software provider Ansys (NASDAQ:ANSS) fell 5.4% in the afternoon session after the company announced that it has agreed to be acquired by Synopsys (NASDAQ:SNPS), with Ansys shareholders set to receive $197 in cash and 0.345 shares of Synopsys common stock per Ansys share. This equates to a $390 per share offer price. The resulting enterprise value is approximately $35 billion, making for a large deal in semis.
The deal was motivated by the complementary capabilities of Synopsys' EDA (Electronic Design Automation) technology and Ansys' simulation and analysis expertise to meet the growing demand for semiconductor design solutions. The combined company anticipates substantial financial benefits, including an expanded total addressable market, strengthened financial position, and synergies in both cost and revenue.The dip in the stock price likely indicates the deal had been priced before the announcement of the final agreement, with the final transaction price coming in at the low end of the takeout ranges speculated in the media. There may also be skepticism as to whether the deal passes regulatory scrutiny.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy ANSYS? Find out by reading the original article on StockStory.
What is the market telling us: ANSYS 's shares are somewhat volatile and over the last year have had 4 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 25 days ago, when the company gained 15.8% after reports from Bloomberg that the company is exploring strategic options, including a potential sale. Bloomberg added that while Ansys is currently consulting with advisers, no definitive decision has been reached, and the company may ultimately choose to continue operating independently.
According to a spokesperson from Ansys, "M&A rumors are not uncommon in our industry, and it's our longstanding policy not to comment on them."
Separately, Oppenheimer analyst Ken Wong said, "We expect shares to trend higher on a Bloomberg report that Ansys is evaluating takeover interest. With a market cap north of $25B, we expect a narrow pool of potential candidates. We see strategic candidates as more likely than a financial partner... We view Ansys' position as a pure play simulation leader, minimizing potential integration hurdles. Recent large software M&A appear less bound to valuation ratios due to volatile pre/post-pandemic comps, but rather 2021 levels, which would put a range of $400 in play."
The analyst's projected price forecast of $400 represents a potential 30% upside from where shares were traded before rumors of the potential sale broke out.
It's worth noting that most sales are executed at a premium, and the stock is likely up in anticipation that existing shareholders can exit at a higher value.
ANSYS is down 7.2% since the beginning of the year, and at $327.41 per share it is trading 9.8% below its 52-week high of $362.88 from December 2023. Investors who bought $1,000 worth of ANSYS's shares 5 years ago would now be looking at an investment worth $2,084.