Why Is ANSYS Stock Trading Lower Tuesday?

Synopsys, Inc SNPS agreed to snap ANSYS, Inc ANSS, sending the stock price of the target company trading lower Tuesday. 

Under the deal, Ansys shareholders will receive $197.00 in cash and 0.3450 shares of Synopsys common stock for each Ansys share, representing an enterprise value of approximately $35 billion based on the closing price of Synopsys common stock on December 21, 2023. 

The implied per share consideration of $390.19, based on the closing price of Synopsys common stock of $559.96 as of December 21, 2023, represents a premium of approximately 29% over Ansys’ closing stock price on December 21, 2023. 

Also Read: Tech Giants In Talks: Synopsys Reportedly Aims For Blockbuster Acquisition Of Ansys In 2024

Synopsys’ total addressable market (TAM) will likely increase by 1.5x to approximately $28 billion. 

This combined TAM will likely grow at roughly an 11% CAGR4, driven by megatrends accelerating the need for the fusion of electronics and physics across industries.

The combination will likely bolster Synopsys’ financial profile. The combined company expects to continue its industry-leading, double-digit growth, which will likely outpace TAM growth. 

The combination will likely expand Synopsys’ non-GAAP operating margin by approximately 125 basis points and unlevered free cash flow margins by about 75 basis points the first full year post-closing. 

The combination will likely accrue to non-GAAP EPS within the second full year post-closing and substantially accretive afterward.

The combined company will likely generate substantial and sustained free cash flow, enabling rapid de-leveraging.

The combined company expects to achieve approximately $400 million of run-rate cost synergies by year three post-closing and roughly $400 million of run-rate revenue synergies by year four, growing to more than roughly $1 billion annually in the longer term.

Under the deal, Ansys shareholders will likely own approximately 16.5% of the combined company pro forma.

Synopsys intends to fund the $19 billion of cash consideration through its cash on hand and debt financing. 

Synopsys has obtained $16 billion of fully committed debt financing. 

The transaction will likely close in the first half of 2025.

Synopsys held $1.59 billion in cash and equivalents as of October 31.

Price Action: ANSS shares traded lower by 5.15% at $328.64 on the last check Tuesday.