By Milana Vinn, Anirban Sen and Stephen Nellis
NEW YORK (Reuters) - Chip design software maker Synopsys (NASDAQ:SNPS) said on Tuesday it would buy Ansys (NASDAQ:ANSS) in a $35 billion cash-and-stock deal, snapping up the maker of software used in creating products from airplanes to tennis rackets of players like Novak Djokovic.
The transaction would be the biggest acquisition in the technology sector since chipmaker Broadcom (NASDAQ:AVGO) took over software maker VMware (NYSE:VMW) last November in a $69 billion deal.
It could herald more big deals as a pickup in economic sentiment and some failed attempts by antitrust regulators to thwart deals embolden chief executives to place large acquisition bets.
The deal implies a per-share value of $390.19 and represents a premium of about 29% over Ansys' last close on Dec. 21, 2023, the companies said.
The transaction will create a massive new player in a sector of the business software industry that is already highly consolidated, which Wells Fargo said in a note creates regulatory uncertainty. After the news, Synopsys shares were up 3.8% to $513, but Ansys shares were down 4.8% to $329.86.
The tie-up comes at time when leading companies like Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC) are designing much more complex chips that are made of many pieces, as well as designing the massive computing systems that house the chips. Synopsys makes tools to design the chips themselves, a complement to offerings from Anysys, which makes software for evaluating larger electronic systems where those chips end up.
"Today, if you talk to a silicon company, their ability to continue on innovating ... is limited by not having a solution that is integrated," Synopsys CEO Sassine Ghazi told Reuters. "So the market is asking for that integrated solution."
Reuters was first to report on Dec. 22 that Synopsys was in talks to acquire Ansys. Ansys started exploring a sale late last year after getting inbound acquisition interest from design software firm Cadence Design (NASDAQ:CDNS) Systems, according to people familiar with the matter.
The deal comes just two weeks after Synopsys co-founder and Executive Chairman Aart de Geus handed over the chief executive reins to Ghazi.
The pursuit of such a transformative acquisition amid a leadership change underscores the commercial appeal of Ansys' software.
Ansys makes simulation software used by engineers, designers and researchers across industries like aerospace, defense, automotive and energy to help analyze products. The company's products compete with Autodesk (NASDAQ:ADSK)'s Fusion 360, AutoCAD and Dassault Systemes' Solidworks.
For its part, Synopsys is a mainstay of chip design companies such as Advanced Micro Devices (NASDAQ:AMD), Intel and Nvidia but also has benefited from a growing trend of firms like Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL)'s Google taking some chip design efforts in-house.
The deal would bring together Synopsys' semiconductor electronic design automation (EDA) tools with Ansys' simulation and analysis portfolio. The EDA industry is already highly consolidated between Synopsys and Cadence, both of which have similar market capitalizations.
DEAL COULD TRIGGER REGULATORS' SCRUTINY
Though Anysys is not a direct competitor to either company, the deal could trigger regulatory scrutiny, especially key markets such as China, where approval times have become more difficult to predict.
Ghazi and Ansys CEO Ajei Gopal told Reuters that the boards of both companies retained independent advisers to evaluate regulatory risks.
"Based on many, many, many discussions, we believe that this deal should be done in the first half of '25," Ghazi said. However, "we gave ourselves 24 months with the priority and objective to get it done."
Both Synopsys and Ansys have seen their share price jump significantly over the past 12 months, amid an artificial intelligence boom.
They began their partnership in 2017 to offer solutions to chip designers for analyzing chips for quality standards to make the overall designing process efficient.
The transaction is expected to add to Synopsys' adjusted earnings within the second full year post-closing and be "substantially" accretive thereafter.
If the deal is called off under specific circumstances, including antitrust hurdles, Synopsys will have to pay Ansys a termination fee of $1.5 billion.
If Ansys ends the deal to accept another, superior proposal, it will be required to pay the design software firm $950 million.