Ansys ANSS and Synopsys SNPS have officially announced their entry into a definitive agreement, paving the way for Synopsys to acquire Ansys. The terms of the agreement outline that Ansys shareholders will receive $197 in cash along with 0.3450 shares of Synopsys common stock for each Ansys share.
This deal, valued at approximately $35 billion, reflects an implied per-share consideration of $390.19 and represents a premium of about 29% over Ansys' closing stock price on Dec 21, 2023. Ansys shareholders are likely to own approximately 16.5% of the combined company (on a pro forma basis).
The deal is anticipated to close in the first half of 2025 and is subject to approval by Ansys shareholders, regulatory approvals, and customary closing conditions. Synopsys intends to fund the $19 billion cash consideration through a combination of its cash on hand and debt financing, having obtained $16 billion of fully committed debt financing.
ANSYS, Inc. Price and Consensus
ANSYS, Inc. price-consensus-chart | ANSYS, Inc. Quote
Potential Value Addition
The strategic combination of Synopsys' cutting-edge semiconductor electronic design automation (EDA) and Ansys' simulation and analysis portfolio is likely to transform the silicon and systems design solutions market. This collaboration is aimed at addressing the increasing demand for enhanced computing performance and efficiency amid the rising complexity posed by AI, silicon proliferation, and software-defined systems.
The collaboration aims to provide engineers with comprehensive, powerful, and system-focused solutions to meet the evolving needs of intelligent systems. Additionally, the partnership accelerates strategy and growth in attractive, adjacent areas such as Automotive, Aerospace, and Industrial.
The combined company is expected to expand Synopsys' total addressable market by 1.5 times to approximately $28 billion, registering an estimated 11% CAGR. This growth is driven by megatrends that emphasize the fusion of electronics and physics across industries.
In the first full year following closing, the transaction is anticipated to increase Synopsys' unlevered free cash flow margins by roughly 75 basis points (bps) and its non-GAAP operating margin by around 125 bps. After the second full year following the completion, the combination is anticipated to be significantly accretive to non-GAAP earnings per share (EPS).
Furthermore, the combined company aims for rapid deleveraging, maintaining a strong balance sheet with a long-term leverage target of less than 1x. The transaction is expected to deliver cost and revenue synergies, with approximately $400 million of run-rate cost synergies by year three post-closing and $400 million of run-rate revenue synergies by year four post-closing. This is likely to grow to more than $1 billion annually in the long term.
The deal will give rise to a giant in the EDA software space as ANSS and SNPS have a market capitalization of $30 billion and $73.6 billion, respectively. Per a report from Grand View Research, the global electronic design automation software market size was valued at $11.10 billion in 2022 and is projected to witness a CAGR of 9.1% from 2023 to 2030.
ANSS currently carries a Zacks Rank #4 (Sell). Shares of Ansys have gained 30.1% in the past year compared with the sub-industry’s growth of 57.5%.
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Stocks to Consider
Some better-ranked stocks worth considering in the broader technology space are Blackbaud BLKB and NETGEAR NTGR. Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Blackbaud’s 2023 EPS has inched up 1.8% in the past 60 days to $3.86. BLKB’s long-term earnings growth rate is 23.4%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 10.6%. Shares of BLKB have gained 31% in the past year.
The Zacks Consensus Estimate for 2023 is pegged at a loss of 9 cents per share for NETGEAR, which remained unchanged in the past 30 days.
NTGR’s earnings outpaced the Zacks Consensus Estimate in three of the last four quarters while missing once. The average surprise being 127.5%. Shares of NTGR have lost 29.5% in the past year.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
