SAN JOSE, CA , today announced that it submitted a proposal to
the Board of Directors of Mentor Graphics Corporation (NASDAQ:
MENT) to acquire Mentor Graphics for $16.00 per share in cash.
Cadence's all-cash proposal, which is not subject to any financing
condition, represents a 30% premium over the closing price of
Mentor Graphics common stock on June 16, 2008, the last trading day
prior to public disclosure of Cadence's proposal, a 59% premium
over the closing price of Mentor Graphics common stock on May 2,
2008, when Cadence presented the terms of the proposal to Mentor
Graphics, and a 46% premium over Mentor Graphics' average closing
price for the past 30 trading days. The transaction price
represents a total enterprise value of $1.6 billion on a fully
diluted basis, which reflects Mentor Graphics' net debt of $69
million.
"A combined Cadence-Mentor will offer customers a broader and
more fully integrated product and technology portfolio in a
timeframe that better enables them to address urgent and complex
challenges associated with their next-generation product
development," said Michael J. Fister, president and chief executive
officer of Cadence. "Together, we will accelerate the rate and
efficiency of customers' innovation by making it possible for them
to develop products that better meet end user needs."
"We believe the combination of Cadence and Mentor Graphics
delivers significant benefits to both companies' shareholders that
are simply too compelling to ignore," said Kevin S. Palatnik,
senior vice president and chief financial officer of Cadence. "Our
$16.00 per share all-cash proposal provides Mentor Graphics
shareholders with a substantial cash premium for their investment
in Mentor Graphics. It remains our strong preference to work
cooperatively with Mentor Graphics, and to immediately commence
discussions with Mentor Graphics regarding our proposal."
Cadence's proposal is subject to the negotiation of a mutually
agreeable merger agreement, the completion of certain limited and
confirmatory due diligence, and the satisfaction of other customary
conditions, including receipt of regulatory approvals.
Deutsche Bank Securities Inc. is acting as financial advisor to
Cadence and Davis Polk & Wardwell is acting as legal
counsel.
Below is the text of the letter that was sent earlier today to
the Board of Directors of Mentor Graphics, in care of Walden C.
Rhines, Chairman and Chief Executive Officer of Mentor
Graphics:
June 17, 2008
The Board of Directors of Mentor Graphics Corporation
c/o Walden C. Rhines
Chairman of the Board of Directors
and Chief Executive Officer
Mentor Graphics Corporation
8005 S.W. Boeckman Road
Wilsonville, OR 97070
Dear Wally:
Over the last two months, we have sought to engage you and your
Board of Directors in discussions regarding our proposal to combine
Cadence Design Systems, Inc. and Mentor Graphics Corporation. We
are disappointed that, despite our best efforts, you have thus far
been unwilling to meaningfully participate in such discussions.
As you will recall, you and I first spoke about combining
Cadence and Mentor Graphics on April 16, 2008. On May 2, 2008, Bill
Porter and I met with you and Greg Hinckley in Portland where we
presented the terms of our proposal to acquire Mentor Graphics for
$16.00 per share in cash.
Following the May 2nd meeting, we repeatedly attempted to bring
the Cadence and Mentor Graphics leadership teams together to
discuss our proposal. On May 23, 2008, however, you informed us
that, even without any substantive discussion with us or
negotiation of our proposal, Mentor Graphics concluded that it did
not wish to pursue discussions with us given Mentor Graphics'
desire to stay independent.
It remains our preference to bring Cadence and Mentor Graphics
together through a negotiated transaction. However, given Mentor
Graphics' refusal to engage in substantive discussions with us
concerning our all-cash premium acquisition proposal and the
importance of this transaction to both companies' respective
shareholders, we have decided to publicly disclose our proposal. We
believe there are clear and compelling advantages to a combination
of Cadence and Mentor Graphics.
As Bill and I explained to you on May 2, based upon our
knowledge of Mentor Graphics from currently available public
information, Cadence is prepared to acquire Mentor Graphics for
$16.00 per share in cash. Our proposal is not subject to any
financing condition. This proposal is a full and fair price and
provides an attractive opportunity for your shareholders to
realize, with certainty, significant value for their investment in
Mentor Graphics. This price represents a 30% premium over the
closing price of Mentor Graphics common stock on June 16, 2008, the
last trading day prior to public disclosure of our proposal, a 59%
premium over the closing price of Mentor Graphics common stock on
May 2, when we presented the terms of our proposal, and a 46%
premium over Mentor Graphics' average closing price for the past 30
trading days.
We believe that a combined Cadence-Mentor will provide customers
a broader and more fully integrated product and technology
portfolio in a timeframe that better enables them to address urgent
and complex challenges associated with their next-generation
product development. From increasing complexity to stringent cost
targets, developers must optimize and prioritize their efforts
across the entire spectrum of specification, architecture, design,
implementation, verification, and manufacturing.
Combining Cadence and Mentor Graphics and aligning the creative
talents of our respective hard-working and innovative employees
will deliver more comprehensive cutting-edge solutions and an
entirely new level of customer experience and satisfaction.
Together we can accelerate the rate and efficiency of customers'
innovation by making it possible for them to develop products that
better meet end user needs.
Our proposal is subject to the negotiation of a mutually
acceptable merger agreement and completion of certain limited and
confirmatory due diligence, which we believe we will be able to
complete expeditiously, as well as satisfaction of other customary
conditions, including receipt of regulatory approvals. We and our
advisors have carefully analyzed the combination of Cadence and
Mentor Graphics and are confident that the proposed transaction
will receive the necessary regulatory approvals.
We strongly believe that a combination of Cadence and Mentor
Graphics will create significant value for both companies'
respective shareholders and customers. Our leadership team and
advisors remain prepared to meet with you and your advisors at your
earliest convenience to conduct the necessary due diligence and
negotiate a merger agreement. I am confident that the Cadence and
Mentor Graphics teams working together can make this transaction a
success.
The Board of Directors of Cadence unanimously supports this
proposal and the combination of Cadence and Mentor Graphics. We
expect you and the Mentor Graphics Board to give this proposal
serious consideration. I look forward to hearing from you soon.
Sincerely yours,
/s/ Michael J. Fister
Michael J. Fister
President and Chief Executive Officer
Audio Webcast and Conference Call Information
Cadence will host an analyst and investor audio webcast and
conference call today, June 17, 2008, at 7:00 a.m. (Pacific) /
10:00 a.m. (Eastern) to discuss the proposed transaction. Attendees
are asked to dial into the conference call or register at the
Website at least 10 minutes prior to the scheduled webcast. Webcast
access and accompanying slides will be available at
www.cadence.com/company/investor_relations. Please see the website
for details on how to access the webcast. The conference call can
be accessed by dialing (888) 562-3356 (toll-free, U.S.) or (973)
582-2700 (toll, international); the conference ID number is
52206067. An archive of the webcast will be available starting
today, June 17, 2008, at 10:00 a.m. (Pacific) / 1:00 pm (Eastern)
and ending at 8:59 p.m. (Pacific) / 11:59 pm (Eastern) on Friday,
June 20, 2008. The replay can be accessed through Cadence's website
or by dialing (800) 642-1687 (toll-free, U.S.) or (706) 645-9291
(toll, international); the conference ID number is 52206067.
About Cadence
Cadence Design Systems enables global electronic-design
innovation and plays an essential role in the creation of today's
integrated circuits and electronics. Customers use Cadence�
software and hardware, methodologies, and services to design and
verify advanced semiconductors, consumer electronics, networking
and telecommunications equipment, and computer systems. Cadence
reported 2007 revenues of approximately $1.6 billion, and has
approximately 5,100 employees. The company is headquartered in San
Jose, Calif., with sales offices, design centers, and research
facilities around the world to serve the global electronics
industry. More information about the company, its products, and
services is available at www.cadence.com.
Cadence is a registered trademark and the Cadence logo is a
trademark of Cadence Design Systems, Inc. All other trademarks are
the property of their respective owners.
Cautionary Statement Regarding Forward-Looking Statements
The statements contained in these materials include
forward-looking statements based on current expectations or
beliefs, as well as a number of preliminary assumptions about
future events that are subject to factors and uncertainties that
could cause actual results to differ materially from those
described in the forward-looking statements, as they relate to
Cadence and Mentor Graphics, the management of either company or
the proposed transaction. However, readers are cautioned not to put
undue reliance on these forward-looking statements, which are not a
guarantee of future performance and are subject to a number of
risks, uncertainties and other factors, many of which are outside
Cadence's control, including, among others: (i) the possibility
that the transaction will not be consummated, (ii) the effect of
the announcement of the proposal on Cadence's and Mentor Graphics'
respective businesses, including their strategic and customer
relationships, ability to retain key employees and stock prices,
(iii) the possibility that the announcement of the proposal may
result in delays in customers' purchases of products and services,
(iv) the possibility that the announcement of the proposal may
result in changes in the mix of license types (i.e. perpetual, term
or subscription) for existing customers, which changes could have
the effect of delaying or accelerating the recognition of revenue
when compared with Cadence's or Mentor Graphics' existing license
mix, (v) the ability of Cadence to successfully integrate the
combined company and otherwise realize within anticipated time
periods the potential benefits of the acquisition, including any
potential synergies described in these materials, (vi) the impact
of general economic conditions in regions in which either such
company currently does business, (vii) industry conditions,
including competition, (viii) fluctuations in exchange rates and
currency values, (ix) capital expenditure requirements, (x)
legislative or regulatory requirements, (xi) changes in the tax
laws and (xii) interest rates and our ability to access capital and
debt markets. The actual results or performance by Cadence or
Mentor Graphics could differ materially from those expressed in, or
implied by, these forward-looking statements. Accordingly, no
assurances can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of
them do so, what impact they will have on the results of operations
or financial condition of Cadence or Mentor Graphics. Cadence does
not intend, and undertakes no obligation, to update these
forward-looking statements. All subsequent written or spoken
forward-looking statements attributable to either Mentor Graphics
or Cadence or persons acting on behalf of either company are
expressly qualified in their entirety by these cautionary
statements.
For a detailed discussion of these and other cautionary
statements, please refer to Cadence's filings with the Securities
and Exchange Commission. These include Cadence's Annual Report on
Form 10-K for the year ended December 29, 2007 and Cadence's
Quarterly Report on Form 10-Q for the quarter ended March 29,
2008.
Important Information
OUR ANNOUNCEMENT TODAY SHOULD NOT BE CONSTRUED AS UPDATING OR
REAFFIRMING PREVIOUSLY ANNOUNCED EXPECTATIONS REGARDING FUTURE
OPERATING RESULTS AS ANNOUNCED IN CADENCE'S PRESS RELEASE DATED
APRIL 23, 2008. DURING CADENCE'S END OF QUARTER QUIET PERIOD,
CADENCE REPRESENTATIVES WILL NOT COMMENT ON CADENCE'S BUSINESS
OUTLOOK OR ITS FINANCIAL RESULTS OR EXPECTATIONS, EXCEPT TO
ACKNOWLEDGE THE FACTORS SET FORTH IN THIS PRESS RELEASE UNDER THE
HEADING "CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS." THE QUIET PERIOD WILL EXTEND UNTIL THE DAY WHEN
CADENCE'S SECOND QUARTER 2008 EARNINGS RELEASE IS PUBLISHED, WHICH
IS CURRENTLY SCHEDULED FOR JULY 23, 2008. CADENCE'S FAILURE TO
COMMENT SHOULD NOT BE CONSIDERED EITHER A REAFFIRMATION OR A DENIAL
OF ITS PREVIOUSLY PROVIDED GUIDANCE.
THIS DOCUMENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT AN
OFFER OR A SOLICITATION RELATING TO CADENCE'S PROPOSAL TO ACQUIRE
MENTOR GRAPHICS. A TENDER OFFER FOR THE SHARES OF MENTOR GRAPHICS
COMMON STOCK HAS NOT COMMENCED. ADDITIONAL DOCUMENTS REGARDING THE
TRANSACTION MAY BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("SEC") AND INVESTORS AND SECURITY HOLDERS ARE URGED TO
CAREFULLY READ SUCH DISCLOSURE DOCUMENTS REGARDING THE PROPOSED
TRANSACTION, IF AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. INVESTORS AND SECURITY HOLDERS MAY
OBTAIN A FREE COPY OF THE DISCLOSURE DOCUMENTS (WHEN AND IF THEY
ARE AVAILABLE) AND OTHER DOCUMENTS FILED BY CADENCE WITH THE SEC AT
THE SEC'S WEBSITE AT WWW.SEC.GOV. IN ADDITION, SECURITY HOLDERS
WILL BE ABLE TO OBTAIN A FREE COPY OF THESE DOCUMENTS (IF AND WHEN
THEY BECOME AVAILABLE) FROM CADENCE.
For more information, please contact: Jennifer Jordan Investors
and Shareholders Cadence Design Systems, Inc. (408) 944-7499 Adolph
Hunter Media and Industry Analysts Cadence Design Systems, Inc.
(408) 428-5882 Matthew Sherman / Eric Brielmann / Ed Trissel Joele
Frank, Wilkinson Brimmer Katcher (212) 355-4449
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