Cadence-Mentor deal makes sense, says analyst

 
SAN JOSE, Calif. -- It's only a matter of time before Cadence Design Systems Inc. buys Mentor Graphics Corp., according to an analyst.

And Cadence should buy Mentor--and for good reason: the troubled EDA company needs to beef up its design-for-manufacturing (DFM) offerings, said Raj Seth, an analyst with SG Cowen Securities Inc. (New York), in a new report.

As reported, Cadence made a bid to acquire Mentor. But Cadence's $1.6 billion offer for rival Mentor Graphics is seen as too low by Mentor's management, which also said it is concerned regulators might scuttle the transaction for antitrust reasons.

Analysts see the handwriting on the wall for Mentor, despite its resistance in the surprising Cadence bid. ''In our view-- especially with a Mentor board meeting around the corner--it will be difficult for Mentor management to fend off Cadence, especially if Cadence has some capacity to increase the bid,'' Seth said in the report.

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