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October 3, 1991


By CBR Staff Writer

Valid Logic Systems Inc, in which IBM Corp has an 8.3% stake and an option to go to 49.9% (CI No 1,418) has definitively agreed to be acquired by its San Jose electronic design automation sibling and neighbour, Cadence Design Systems Inc. The agreement calls for Cadence to pay 0.323 of its own shares for each Valid out, valuing the company at $198m at the current Cadence price. IBM paid $11.2m for its 8.3% stake, which seems to work out at $3.82 a share, so the company is showing a paper profit on its investment, since the Cadence terms come out at $5.61 a share, against $4.25 in the market. But IBM also made a reserve of $90m available to Valid over four years, tied to Valid’s sales of its software on IBM workstations. The two companies are seen as a good fit, and their combined sales for 1990 add up to $390m, knocking on the door of Mentor Graphics Corp, which did $435m. Valid is strong in circuit board design software, Cadence in chip design. Cadence will lay off 10% of the combined workforce of 2,800 people, which will lead to a big extraordinary charge, likely leading to a loss for the quarter in which it is taken. December completion is expected.

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