Ansys (ANSS) shareholders approve acquisition by Synopsys

Ansys ANSS announced that its shareholders voted to approve the proposed acquisition by Synopsys. Terms of the deal state that Ansys shareholders will receive $197 in cash along with 0.3450 shares of Synopsys common stock for each Ansys share.

Ansys added that approximately 98.7% of shareholders voted in favor of the acquisition, representing approximately 83.8% of the company’s total common shares. Valued at approximately $35 billion, this transaction includes an implied price per share of $390.19 and represents a premium of approximately 29% to the Ansys share price at the close of business on December 21, 2023.

The transaction is expected to close in the first half of 2025 and is subject to customary closing conditions, including receipt of remaining regulatory approvals.

ANSYS, Inc. Price and consensus

ANSYS, Inc. price consensus chart | Quote ANSYS, Inc

Potential synergies

The deal will create a giant in the electronic design automation (EDA) software space, as ANSS and SNPS have a market capitalization of $30 billion and $73.6 billion, respectively. According to a report by Grand View Research, the global electronic design automation software market size was valued at USD 11.10 billion in 2022 and is expected to grow at a CAGR of 9.1% from 2023 to 2030.

The partnership between Synopsys’ advanced semiconductor EDA and Ansys’ simulation and analysis tools will revolutionize the silicon and system design market. This collaboration addresses the growing demand for improved computing performance and efficiency, driven by the increasing complexity of artificial intelligence, the spread of silicon technology and software-defined systems.

The collaboration aims to provide engineers with comprehensive, efficient and system-centric solutions to meet the evolving needs of intelligent systems. This partnership also accelerates growth in key areas such as the automotive, aerospace and industrial sectors.

The merger is expected to increase Synopsys’ total addressable market by 1.5-fold, reaching approximately $28 billion, with an estimated annual growth rate of 11%. This growth is driven by the convergence of electronics and physics across industries.

In the first year after the merger, Synopsys expects its unleveraged free cash flow margins to improve by approximately 75 basis points (bps) and its non-GAAP operating margin by approximately 125 basis points. In the second year after the merger, the transaction is expected to be significantly accretive to non-GAAP earnings per share (EPS).

The combined company plans to rapidly reduce debt, aiming for a long-term leverage ratio of less than 1x. The merger is expected to result in significant cost and revenue synergies, providing approximately $400 million in annual savings in the third year after the merger and $400 million in annual revenue synergies in the fourth year, potentially exceeding $1 billion annually over the long term.

ANSS is currently sporting a Zacks Rank of 4 (Sell). Ansys shares are up 9.2% over the past year compared with the sub-industry’s growth of 35.5%.

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Stocks to consider

Some of the better-ranked companies in the broader technology space are Woodward WWD, Arista networks ANET i Super Micro Computer SMCI. Each stock currently carries a Zacks Rank #1 (Strong Buy). You can see complete list of today’s Zacks #1 ranked stocks here.

The Zacks Consensus EPS estimate for Woodward’s fiscal 2024 EPS has increased 11.1% over the past 60 days to $5.86. WWD’s long-term earnings growth rate is 16.3%.

Woodward’s earnings have topped the Zacks Consensus Estimate in each of the trailing four quarters, representing an average surprise of 26.1%. WWD stock is up 62% over the past year.

ANET’s Zacks Consensus Estimate for 2024 EPS has moved 6.2% over the past 60 days to $7.92. ANET’s long-term earnings growth rate is 15.7%.

Arista Networks’ earnings have topped the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average earnings surprise of 15.4%. ANET stock has gained 127.3% over the past year.

The Zacks Consensus Estimate for Super Micro Computer’s fiscal 2024 EPS has increased 8.3% in the past 60 days to $23.51. SMCI’s long-term earnings growth rate is 52.3%.

SMCI’s earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 6.9%. SMCI shares are up 481% over the past year.

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