March 31, 2011 / 7:48 PM / 7 years ago

Mentor Graphics rejects Icahn loan offer; to issue debt

BANGALORE (Reuters) - Chip-design software maker Mentor Graphics Corp MENT.O rejected activist investor Carl Icahn’s offer of a $220 million loan and said it plans to go ahead with a convertible debt offering.

Hedge fund Casablanca Capital, which holds about a 5.5 percent stake in Mentor Graphics, called the $253 million offering “ill-timed and ill-conceived.”

Mentor plans use a part of the proceeds from the offering to repurchase 1.7 million shares and pay down debt.

Icahn’s proposal has a higher interest rate and its short maturity period would create unnecessary risk in Mentor’s capital structure, the company said in a statement.

On Tuesday, Icahn said his company would be willing to lend Mentor the $220 million on a senior unsecured basis, at a rate of 6.25 percent for a period of two and a half years.

Casablanca, which had earlier nominated its own people to Mentor’s board, reiterated its support for Icahn’s nominees and his position on the company’s sale, and said Mentor rejected Icahn’s offer without a viable alternative in hand.

Icahn offered $1.73 billion for Mentor in February, and predicted that the $17-per-share proposal would flush out higher bids for the company.

Shares of the Wilsonville, Oregon-based company were up 1 percent at $14.87 in midday trade on Nasdaq.

Reporting by Sayantani Ghosh and Supantha Mukherjee; Editing by Unnikrishnan Nair

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