Fending off Cadence, Mentor tries again for British company

Tuesday, June 24, 2008 - Portland Business Journal - Even as it decided to reject a $1.6 billion offer from rival Cadence Design Systems Inc., the board of Mentor Graphics Corp. has been pushing forward its offer for British company Flomerics Group PLC -- an offer that Flomerics' board says is unacceptably low.

Wilsonville-based Mentor (NASDAQ: MENT) extended until July 2 its offer of 104 pence per share, or about $47.1 million, for Flomerics, a simulation software company located in Surrey, 13 miles southwest of London.

Flomerics' stock, which is traded on the London exchange, closed at 105.5 pence on June 24, giving the company a market cap of nearly $47.8 million.

Flomerics' board has urged shareholders to reject the offer, which values the company at 1.2 times its historic revenue. The board pointed out that Mentor had rejected an offer equal to 1.8 times historic revenue from San Jose, Calif.-based Cadence (NASDAQ: CDNS).

As of June 23, Mentor's offer had been accepted by the owners of fewer than 3 percent of Flomerics' outstanding shares.

Mentor itself owns almost 30 percent of Flomerics. The company purchased just over 20 percent of Flomerics' outstanding shares in mid-March, sending the stock soaring from less than 60 pence per share, where it had been trading since last summer, to more than 80 pence per share. The stock has continued to climb since.

Mentor first made its all-cash offer for Flomerics on May 9. The price of 104 pence per share represented a 19 percent premium to the previous day's closing price.

The offer represented an even higher premium -- 109 percent -- over the price of Flomerics' stock prior to Mentor's March 14 announcement that it was buying 20.1 percent of the company from a venture capital firm.

Flomerics has revealed it is also in talks with San Rafael, Calif.-based Autodesk Inc. (NASDAQ: ADSK), the maker of AutoCAD design software. Flomerics announced on June 12 that Autodesk has informed Flomerics' board that any offer would be all cash. A firm offer has not yet been made.

Flomerics has made public announcements about the progress of both offers continually over the past several months.

In sharp contrast, Mentor did not reveal Cadence's offer publicly at all, and only commented on it after Cadence made public a letter from its CEO, Mike Fister, to Mentor CEO and Chairman Walden Rhines, on June 23. At that point, it had been two months since Cadence's initial offer.


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