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Chip design firms plan merger

A merger between Cadence Design Systems and High Level Design Systems could make the production of complex, densely packed semiconductor chips commonplace by the middle of next year.

Design software makers Cadence Design Systems (CDN) and High Level Design Systems have announced merger plans, a relationship that could make the production of complex, densely packed semiconductor chips commonplace by the middle of next year.

The $94.1 million merger will consist of a tax-free, stock swap in which HLDS shareholders will receive 22/100 of a share of Cadence common stock for each share of HLDS stock. Cadence expects to issue approximately 2.5 million shares.

Cadence was at 36-7/8 a share in midmorning trading.

Cadence, with about $700 million in annual revenues, is acquiring $30-million HLDS and its 70 employees to bolster its computer-aided design (CAD) software. The software focuses on chip design at the "deep sub-micron" level of less than .5 microns, a number that describes how densely transistors are packed on the chip surface.

HLDS is known for its software that enables high-level "floor planning" of chip architecture. By incorporating HLDS's technology, Cadence hopes to produce software tools to bring the average chip density, also called "process geometry," down to the .35 micron level.

HLDS employees will be retained and the companies' Silicon Valley campuses will continue to both operate, according to Mike Sottak, a Cadence spokesman.