Mentor Graphics Challenges Quickturn Board with $12.125 per Share All-Cash Offer

Strategic Insights -

Mentor Graphics, a leading provider of electronic design automation (EDA) tools, has launched a hostile takeover bid for Quickturn Design Systems, offering $12.125 per share in cash, representing a 51.6% premium over Quickturn's closing price before the offer was announced. The bid, valued at $217 million, is subject to certain conditions, including a majority of outstanding Quickturn shares being validly tendered and not withdrawn, redemption or removal of Quickturn's shareholder rights plan, and the inapplicability of the Delaware business combination statute.

The Quickturn Board, however, has taken actions to entrench themselves and prevent stockholders from realizing the benefits of Mentor's offer, including amending its "dead hand poison pill" to make it impossible for a new board elected by a majority of Quickturn's stockholders to take the steps necessary to approve Mentor's all-cash offer and related merger proposal for at least six months after the Special Meeting election. The Board has also adopted anti-takeover bylaw amendments that impose a minimum delay of 90 to 100 days before stockholders can vote to remove the Board that is opposing Mentor's offer.

Mentor Graphics President and CEO, Dr. Walden C. Rhines, has written a letter to Quickturn stockholders, stating that the Quickturn Board and management have failed to deliver value to the company's stockholders. He cites several reasons to support this position, including the fact that Quickturn has generated earnings per share significantly below consensus analyst estimates in three of the last four quarters, its earnings have declined each year since 1996, and its revenues have declined from the comparable 1997 period.

The five nominees nominated by Mentor Graphics are: Gideon Argov, Chairman, President and CEO of Kollmorgenson Corporation; Scott H. Bice, Dean of the University of Southern California Law Center; Harry L. Demorest, Chief Executive Officer of Columbia Forest Products, Inc.; C. Scott Gibson, President of Gibson Enterprises; and Michael J.K. Savage, Managing Director of the San Francisco Opera and founder and former President of Savage Petroleum Company.

Mentor Graphics is urging Quickturn stockholders to vote in favor of the nominees and reject the Quickturn Board's entrenching actions. The special meeting is scheduled to take place on October 29, 1998.

Key Takeaways:

  • Mentor Graphics has launched a hostile takeover bid for Quickturn Design Systems, offering $12.125 per share in cash, representing a 51.6% premium over Quickturn's closing price before the offer was announced.
  • The bid, valued at $217 million, is subject to certain conditions, including a majority of outstanding Quickturn shares being validly tendered and not withdrawn, redemption or removal of Quickturn's shareholder rights plan, and the inapplicability of the Delaware business combination statute.
  • The Quickturn Board has taken actions to entrench themselves and prevent stockholders from realizing the benefits of Mentor's offer, including amending its "dead hand poison pill" and adopting anti-takeover bylaw amendments.
  • Mentor Graphics President and CEO, Dr. Walden C. Rhines, has written a letter to Quickturn stockholders, stating that the Quickturn Board and management have failed to deliver value to the company's stockholders.
  • The five nominees nominated by Mentor Graphics are: Gideon Argov, Scott H. Bice, Harry L. Demorest, C. Scott Gibson, and Michael J.K. Savage.
  • The special meeting is scheduled to take place on October 29, 1998.

Statistics:

  • The offer price of $12.125 per share in cash represents a premium of 51.6% over Quickturn's closing price of $8.00 per share on August 11, 1998.
  • The transaction is valued at $217 million, based on Quickturn's 17,922,518 shares outstanding at July 31, 1998.
  • Quickturn has generated earnings per share significantly below consensus analyst estimates in three of the last four quarters.
  • Quickturn's earnings have declined each year since 1996.
  • Quickturn revenues have declined from the comparable 1997 period.

Sources:

  • Mentor Graphics press release dated September 11, 1998.
  • Letter from Dr. Walden C. Rhines to Quickturn stockholders dated September 11, 1998.
  • Quickturn Design Systems press release dated August 12, 1998.
  • SEC filing: Form 8-K dated August 12, 1998.