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Synopsys to buy rival Magma for $507 million

All-cash deal for publicly held chip design software maker Magma Design Innovations is a 28 percent premium over its previous closing price.

Chip design software maker Synopsys announced today it has agreed to acquire rival Magma Design Innovations for $507 million in cash.

Synopsys will pay $7.35 a share for San Jose, Calif-based Magma, a 28 percent premium over its closing price Wednesday of $5.72.

Mountain View, Calif.-based Synopsys was founded in 1986 and competes with Cadence Design Systems and Mentor Graphics in the sector of making software to help designers create and verify complex integrated circuits.

"The dramatic rise in complexity of today's semiconductor designs for all process nodes requires an equally dramatic increase in designer productivity," Chief Executive Officer Aart de Geus said in a statement. "This acquisition will enable Synopsys to accelerate the delivery of the technology our customers need to keep the overall cost of design in check."

The merger, which is expected to close in the second quarter of 2012, is subject to approval by Magma shareholders.

For the period ended October 31, Synopsys reported a profit of $39.9 million, or 27 cents a share, up from $25.4 million, or 17 cents a share, a year earlier. Revenue rose 4 percent to $390.5 million from $375.5 million.