February 22, 2011 / 3:08 PM / 6 years ago

Icahn sees Mentor bid flushing out rivals

3 Min Read

BANGALORE (Reuters) - Billionaire activist investor Carl Icahn offered $1.73 billion for Mentor Graphics Corp MENT.O, and predicted the move would flush out higher bids for the chip-design software maker.

Icahn, Mentor's biggest shareholder with a 14.7 percent stake, offered $17 a share -- a 17 percent premium to the company's Friday close of $14.52.

In a letter to Mentor's board, Icahn wrote: "We believe there are potential strategic bidders for Mentor Graphics whose bid will reflect inherent synergies and should be superior to our $17 offer."

In a later statement, Mentor said it would review Icahn's conditional proposal, and advised shareholders to take no action at this time.

Earlier this month, sources told Reuters that Mentor Graphics could attract bids from peers Synopsis (SNPS.O), Parametric Technology Corp PMTC.O and Cadence Design Systems (CDNS.O).

The move for Mentor came a day after Icahn, who turned 75 last week, lost out on buying power company Dynegy Inc (DYN.N), unable to convince shareholders to agree to his $665 million cash bid.

Icahn first reported a 7 percent stake in Mentor almost 9 months ago, and its stock price has soared 60 percent since then. In June, the company adopted a poison pill preventing any shareholder from accumulating more than a 15 percent stake in Mentor.

Earlier this month, Icahn put pressure on the company, saying it should be put up for sale. He also nominated three individuals to its board.

Icahn's offer values Mentor at 20 times fiscal 2012 earnings, compared with its current multiple of 17 times. The sector average is 22.5.

Fellow shareholder hedge fund Casablanca Capital, which owns 5.5 percent of Mentor, has also put forward three names for board seats.

The dissident shareholders released their statements after Mentor said it would hold its annual meeting on May 12, six weeks earlier than last year, leaving them little time to nominate an alternate slate.

An aide to Icahn said he was not immediately available to comment for this story. Casablanca declined to comment, as did Harris Associates, which holds a 3.7 percent stake in Mentor.

Shares of Wilsonville, Oregon-based Mentor rose more than 14

percent to a near 4-year high of $16.56 on Tuesday on Nasdaq. Trading in the stock was close to 5 times the normal daily volume.

The stock was last quoted at $15.55, around 8 percent below Icahn's offer.

Additional reporting by Supantha Mukherjee; Editing by Saumyadeb Chakrabarty and Ian Geoghegan

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