By Christopher Alessi and Natascha Divac
FRANKFURT -- Siemens AG's planned acquisition of automation and industrial software provider Mentor Graphics Corp. is the German giant's latest play to stay competitive in the race to digitize heavy industry.
Siemens said Monday it offered $37.25 a share in cash, equivalent to a 21% premium on Mentor's closing share price on Friday, giving the U.S. company an equity value of around$4 billion.
Wilsonville, Ore.-based Mentor, which has agreed to the acquisition, sells software and hardware design-automation tools for the development and testing of advanced electronic systems.
"It's a perfect portfolio fit to further expand our digital leadership and set the pace in the industry," said Siemens Chief Executive Joe Kaeser.
The deal is the latest effort by Siemens to expand its profitable industrial software and automation business, which provides tools for digitizing old-line factories.
Siemens has been a leader in the so-called Industrial Internet, a global effort to marry heavy industry with the Internet of Things. The endeavor aims to increase manufacturing efficiency and productivity by developing smart factories in which robotic machines share data over the web, while also enabling greater product customization on the shop floor.
Siemens and competitors, including General Electric Co. and Robert Bosch GmbH, have been working on both digitizing their own manufacturing processes and developing software platforms and automation tools to sell to other industrial players.
In Germany, where manufacturing remains central to a thriving export economy, the endeavor is being driven by a joint effort of the private and public sectors, known as Industrie 4.0. The German government sees the initiative as a way for German firms to keep their competitive edge amid a resurgence of manufacturing in the U.S. and against less expensive emerging-market producers.
U.S. companies including GE are leading a similar initiative, known as the Industrial Internet Consortium, of which both Siemens and Bosch are now members.
Since Mr. Kaeser took over the top job in 2013, he has moved aggressively both to strengthen Siemens's presence in the U.S. market and apply the company's digital capabilities to boost efficiency across its own industrialbusinesses, such as power generation and equipment for the oil-and-gas industry
Mr. Kaeser, in an interview earlier this year, said Siemens's expertise in automating production lines and factories gives it an edge over top rival GE. A spokesman for GE at the time said Siemens no longer maintained an edge in the field of automation.
GE has said it would invest $1.4 billion in its fast-growing software business this year.
Mr. Kaeser's first big push into the U.S. came with Siemens's $7.6 billion acquisition of oil-equipment maker Dresser-Rand, agreed upon in 2014. Earlier this year, the company acquired U.S.-based simulation software provider CD-adapco, in a deal valued at roughly $1 billion. The integration of that privately held firm has helped boost growth at Siemens's Digital Factory unit, which last week posted a 10% rise in profit for the fourth quarter of fiscal year 2016.
Siemens said it expects to close the Mentoracquisition by the second quarter of calendar year 2017, from which point it should generate synergies of EUR100 million ($108.6 million) in earnings before interest and taxes within four years. The transaction should contribute to earnings per share growth within the first three years after the closing, the company added.
Mentor had over 5,700 employees when its fiscal year ended Jan. 31. The firm generated revenue of approximately $1.2 billion with an adjusted operating margin of 20.2%.
Mentor shareholder Elliott Management, which last month increased its stake in the electronics design company to 8.1%, has committed to support the transaction, the company said.
Write to Christopher Alessi at firstname.lastname@example.org and Natascha Divac at email@example.com
(END) Dow Jones Newswires
November 14, 2016 14:24 ET (19:24 GMT)
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