Mentor Graphics Corp hasn’t given up on acquiring Quickturn Design Systems Inc despite its merger agreement with Cadence Design Systems Inc. Mentor said it is prepared to pay more for Quickturn in a negotiated merger than the $14 per share – or roughly $253m – that Cadence is offering. The size of Mentor’s merger proposal would be determined by due diligence which demonstrates greater value for Quickturn. Mentor also said it has filed a lawsuit in Delaware against Quickturn and Cadence in an attempt to block the merger. The suit alleges that the Quickturn directors have again breached their fiduciary duties to Quickturn’s stockholders by deliberately excluding Mentor from the process of selling the company and failing to get the best price for the company. The suit seeks to void the agreed-upon merger pact and to force Quickturn’s board to auction the company to the highest bidder. Mentor is also seeking an injunction against several provisions designed to ensure that the Cadence deal goes through – namely the payment to Cadence of a $10.6m termination fee, a $3.5m expense reimbursement fee and the lock- up option for Cadence to purchase 19.9% of Quickturn’s common stock. Mentor also said it is continuing to evaluate its alternatives with respect to its existing tender offer for all of Quickturn’s outstanding stock for $12.125 cash per share – a value of about $216m – which has not yet been withdrawn and is scheduled to expire on January 11. Mentor asserts that on December 8, Quickturn invited it to submit a higher proposal, and Mentor promised a response the next day – but the Quickturn directors then approved the Cadence merger that same night without even waiting to hear back from Mentor. Mentor also said the special meeting of Quickturn’s stockholders will go ahead as planned on January 8 to consider Mentor’s proposal to the remove the current Quickturn directors and replace them with new ones nominated by Mentor. Quickturn, meanwhile, described Mentor’s latest move as a last ditch effort in a desperate attempt to try to acquire Quickturn through a hostile takeover. The company reiterated its commitment to the Cadence deal and said it remains confident that it will go through. It charges that Mentor’s primary motivation for the takeover attempt was to obtain Quickturn’s patents. The two are currently involved in patent infringement litigation in which Quickturn is seeking $225m in damages. A court date has been set for February 16.
