(Bloomberg) -- Chip-design company Synopsys agreed to buy software developer Ansys for about $34 billion in cash and stock, marking one of the largest deals announced worldwide in the past year.
Ansys shareholders will receive $197 in cash and 0.345 shares of Synopsys stock per share, according to an announcement by the companies Tuesday. That values Ansys shares at about $390.19 based on closing share prices on Dec. 21, before Bloomberg reported that the companies were in talks. The deal is set to close in the first half of 2025, Synopsys said.
The acquisition aims to expand Synopsys’ customer base and its suite of products. Synopsys, based in Sunnyvale, California, is one of a few major companies that make software used to design semiconductors, competing primarily with Cadence Design Systems. Meanwhile, Ansys makes simulation software used by engineers to help predict how products will work in the real world. Engineers use its structural analysis software before a project to cut manufacturing costs, reduce risk, and bring products to market faster.
Ansys shares fell 5.4% to $327.95 at 12:14 p.m. in New York, after closing at $346.48 on Friday. The drop signals a potential pullback by investors who saw the stock price surge after last month’s reports that the Canonsburg, Pennsylvania-based company was exploring a sale. Ansys had a market value of about $30.1 billion on Jan. 12. Synopsys shares rose 3% to $508.99.
“Given a long timeline, and geopolitical risk wrapped into antitrust risk, we aren’t overly surprised to see Ansys trade off,” said Tyler Tebbs, managing director at the advisory firm MKP Advisors. Tebbs also noted “the marginal premium” that is being offered compared with the stock’s previous close.
Synopsys is adding another layer to the design systems it sells. Its current customers mainly make electronic components, primarily semiconductors. Ansys will bring in makers of everything from aircraft to industrial machinery just as that gear becomes more complicated and reliant on automation, which ultimately depends on semiconductors. Synopsys management is betting that the growing use of artificial intelligence will expand the need for systems that can map out increasingly complex electronic systems, keeping them safe and affordable.
The takeover of Ansys provides an early boost for dealmakers in 2024 as they seek to move on from a lackluster period of mergers and acquisitions activity. Niraj Patel, an analyst at Bloomberg Intelligence, called the deal a “strong strategic fit” for Synopsys. Still, Patel said in an email, regulatory approvals and a lengthy close time of 2025 could signal some challenges.
In August, the firm completed a purchase of PikeTec, a closely held German software company that focuses on autonomous driving, in a deal valued at $200 million. And in an interview with Bloomberg Television, then-outgoing Chief Executive Officer Aart de Geus Brisk said the company could be selling even more into China if it weren’t for existing export restrictions.
Synopsys generated $5.84 billion in sales in the fiscal year ending Oct. 31 and analysts project a 13% revenue jump in fiscal year 2024. Ansys is expected to produce $2.26 billion in sales in 2023, with analysts estimating a 10% increase this year.