Siemens Group on $4.5 Billion Software Deal

Siemens Group of German engineers has agreed to buy Mentor Graphics Corp. (sells software and hardware used to design electronics for the semiconductor, automotive and transportation industries) for $37.25 per share in cash valuing the U.S. software group at $4.5 billion in its biggest acquisition since 2014 as the German engineering company extends its industrial software capability.

The agreed price is not overly expensive and will make Siemens more competitive in the industry of software business, German brokerage Baader Helvea said in a note to clients. The agreement comes almost six years after activist investor Carl Icahn who was Mentor's largest shareholder at the time of his bid unsuccessfully pushed for a sale of Mentor.

Siemens has pushed deeper into software applications that are crucial to run its industrial equipment which they had to compete with software companies who can also develop technology faster and increasingly better because of their strategy that has a sole focus and has identified known as part of its "Vision 2020" strategy.

Siemens Chief Financial Officer Ralf Thomas said on the call, that there will be some job cuts resulting from the combination and the cost savings of more than 100 million euros ($108 million) per year are expected by the fourth year of ownership.

The chief executive Joe Kaeser of Siemens has set to reshape the group, a household name in Germany, to make it more profitable and agile by selling off non-core businesses and invest in areas, such as software, that promises faster growth and fatter margins. Mr. Kaeser also assured investors that he will improve on his predecessor Peter Loescher's weak track record on making acquisitions pay off in the longer run.

Siemens software executive Chuck Grindstaff on a conference call said that the footprint of Mentor Graphics will reach a lot more customers and offers a unique opportunity to design products in a more holistic way.