Siemens to acquire US-based Mentor Graphics for $4.5bn

The largest engineering company in Europe, Siemens has decided to boost its software business by acquiring U.S. based Mentor Graphics which deals in electronic design automation for electrical engineering and electronics.

The $4.5 billion deal is expected to close in the second quarter of 2017.

The acquisition, according to Siemens will to add to its earnings per share within three years and will lift earnings before interest and tax (EBIT) by more than 100 million euros ($107.21 million) within four years. The company is also expecting a boost in its software revenue.

As per the deal, Siemens will pay $37.25 per share to the shareholders of Mentor Graphics, which is a 21 percent premium on Friday’s closing price, and will fund the deal from its cash reserves.

Siemens finance chief, Ralf Thomas said, "Our customers are driving a paradigm shift toward more and more complex and smart connected products such as autonomous vehicles. This acquisition is our answer to this development."

Furthermore, the company is also planning to reshape the entire Siemens group for higher profits and faster growth by selling off non-core businesses and investing in software.

In early U.S. trading, Siemens was 1.1 percent higher by 1435 GMT, while Mentor Graphics shares jumped to $36.37, which is a massive 18.5 percent hike.

Deutsche Bank and JP Morgan were the advisors of Siemens over the transaction, whereas Mentor Graphics was advised by the Bank of America.