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Synopsys 8-K Report, Material Agreement (Jan 16, 2024)

Reports
Material Agreements·Regulation FD·Exhibits & Filings
Filing Date
Filed January 16, 2024
Period End
January 15, 2024
Security
SNPS
In the record · 2016–202610-K1010-Q338-K142

SNPS filed 10 annual reports (10-K), 33 quarterly reports (10-Q) and 142 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Apr ’18Apr ’18
  2. Leadership change8-K · Sep ’20Sep ’20
  3. Material agreement8-K · Dec ’22Dec ’22
  4. Restructuring8-K · Aug ’26Aug ’26

01—Abstract

Summary

Summary of the 8-K filed January 16, 2024. Cited figures are marked; the original filing is the authoritative source.

On January 15, 2024, Synopsys (SNPS) entered into a definitive Agreement and Plan of Merger to acquire ANSYS (ANSS) in a transaction valued at roughly $35 billiona in enterprise value.

Ansys shareholders will receive $197.00b in cash plus 0.3450 Synopsys shares for each Ansys share, implying $390.19 per share based on Synopsys' December 21, 2023 closing price of $559.96, a premium of about 29% to Ansys' unaffected price. Ansys holders are expected to own about 16.5% of the combined company, with Synopsys holders owning about 83.5%. Synopsys plans to fund the roughly $19 billion cash component with cash on hand and debt, backed by $16 billion of committed senior bridge term loans from JPMorgan, Bank of America, and HSBC.

Financing is not a closing condition for Synopsys. The strategic rationale centers on combining Synopsys' semiconductor EDA leadership with Ansys' simulation and analysis portfolio to create a 'silicon to systems' platform. Management projects the combined total addressable market will grow 1.5x to about $28 billionc at roughly an 11% CAGR.

Synopsys expects about 125 basis points of non-GAAP operating margin expansion and about 75 basis points of unlevered FCF margin expansion in the first full year after closing, with EPS accretion in the second full year. It also targets about $400 milliond of run-rate cost synergies by year three and about $400 million of revenue synergies by year four. The company expects to de-lever to below 2x debt to Adjusted EBITDA within two years of closing.

Key risks include regulatory approvals (HSR and antitrust and foreign investment reviews), Ansys shareholder approval, and the debt load that the deal adds. The transaction carries a $1.5 billion reverse termination fee payable by Synopsys in certain antitrust or foreign investment scenarios, and a $950 million fee payable by Ansys in specified cases. The parties expect closing in the first half of 2025, and the End Date may extend to January 15, 2026.

02—Key points

Key Highlights

  1. Synopsys to acquire Ansys for $197.00 cash plus 0.3450 Synopsys shares per Ansys share, implying $390.19 per share and about a 29% premium to Ansys' unaffected price.
  2. Transaction enterprise value of approximately $35 billion; roughly $19 billion of cash consideration, with $16 billion of committed bridge financing.
  3. Ansys shareholders to own about 16.5% of the combined company; Synopsys holders about 83.5%.
  4. Stock issuance is capped at 19.9999% of Synopsys' outstanding shares, with any excess shifted to cash.
  5. Targeted synergies of about $400 million run-rate cost savings by year three and about $400 million revenue synergies by year four, rising to over $1 billion long term.
  6. Synopsys expects roughly 125 bps non-GAAP operating margin expansion and 75 bps unlevered FCF margin expansion in the first full year post-close, with non-GAAP EPS accretion in the second full year.
  7. Termination fees: $1.5 billion payable by Synopsys in specified antitrust or foreign investment scenarios; $950 million payable by Ansys in specified cases. Expected closing in the first half of 2025.

03—Questions

Frequently Asked Questions

  1. How much will Synopsys pay for Ansys and how is it structured?

    Each Ansys share converts into $197.00 in cash plus 0.3450 Synopsys shares. Based on Synopsys' $559.96 closing price on December 21, 2023, that is about $390.19 per Ansys share, and the enterprise value is roughly $35 billion. Synopsys' stock component is capped at 19.9999% of its outstanding shares, with any shortfall paid in additional cash.

  2. How will Synopsys finance the deal?

    The roughly $19 billion cash portion will come from Synopsys' cash on hand and debt. Commitment parties including JPMorgan, Bank of America, and HSBC have agreed to provide up to $16 billion of senior bridge term loans. Financing is not a condition to closing for Synopsys.

  3. What could prevent the deal from closing?

    Closing requires Ansys shareholder approval, expiration or early termination of the HSR waiting period, approvals under other antitrust and foreign investment regimes, an effective S-4 registration, Nasdaq listing approval for the new shares, and no legal prohibition or material adverse effect. Regulatory conditions may also be imposed on the combined company.

  4. What happens to Synopsys' balance sheet and shareholders' ownership?

    Synopsys expects to de-lever to below 2x debt to Adjusted EBITDA within two years of closing and to a long-term target below 1x while maintaining investment grade ratings. Existing Synopsys holders will own about 83.5% of the combined company, so the deal dilutes their stake by roughly 16.5%.

  5. What are the main termination fee exposures?

    Synopsys would owe Ansys a $1.5 billion termination fee in specified circumstances, including certain antitrust or foreign investment-related injunctions. Ansys would owe Synopsys $950 million if it accepts a superior proposal or if its board changes its recommendation in favor of the merger.

04—Continue

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