| SAN JOSE, Calif. — Synopsys Inc.'s abrupt termination of its merger agreement with memory IP vendor Monolithic System Technology Inc. (MoSys) will likely prompt MoSys to seek a shotgun wedding through a lawsuit, according industry analysts. |
Late last Friday (April 16), Synopsys announced it had terminated plans to acquire MoSys for unspecified reasons. It also disclosed it was paying MoSys a $10 million termination fee.
"MoSys does not believe that Synopsys has the right to terminate the merger agreement and is prepared to promptly proceed to close the transaction with Synopsys," according to a statement from MoSys issued on April 17.
Mosys also claimed that "all conditions" in the merger agreement were satisfied prior to expiration of the offer, and that Synopsys delivered its termination notice too late, after the offer expired and without accepting any of the tendered shares. MoSys claims that at the close of business last Friday roughly 27.5 million shares, representing 89 percent of MoSys common stock, had been tendered as part of the acquisition.
MoSys executives have since refused to comment beyond the release.
A Synopsys' spokeswoman said Monday that it issued the termination notice to MoSys just before 9 p.m. Pacific time on on April 16, which was before the deadline of 12:00 a.m. Pacific time. She added that the company has no plans to complete the acquisition. Financial analysts said they expect MoSys to soon file a lawsuit seeking a legal remedy that would reverse termination of the acquisition or force Synopsys to either complete the merger or pay additional funds to MoSys. The Synopsys spokeswoman said a lawsuit wouldn't be unexpected.
The proposed acquisition of MoSys for around $350 million was very controversial within the EDA industry because Synopsys would have paid a premium for a struggling company that was outside its core expertise.
After Synopsys announced its intent to buy MoSys in February, Synopsys Chairman and CEO Aart de Geus defended the acquisition plan, telling EE Times that he believed MoSys had strong embedded memory technology that it would flourish under the Synopsys banner. de Geus even justified the acquisition in an E-mail Synopsys User's Group mailing.
de Geus was unavailable for comment, but the Synopsys spokeswoman said the company terminated the agreement because "a number of requirements of the merger agreement were not met."
She added that a trade secret misappropriation and patent infringement suit filed by UniRAM against MoSys was one but "not the only" factor behind the Synopsys decision to terminate the deal.
She declined to comment on other reasons that may have factored into Synospys terminating the agreement.
UniRAM filed the claim against MoSys just days after Synopsys and MoSys announced the acquisition in February. The claim alleges that UniRAM provided trade secret information to Taiwan Semiconductor Manufacturing Co. Ltd. between 1996 and 1997, and that MoSys improperly obtained those unspecified trade secrets in an unknown manner. MoSys has denied the allegations.
While analysts said the timing of the suit showed signs of being, in one observers' words, "a stick up," they noted that it may have also been a convenient way for Synopsys to back out of the unpopular and pricy acquisition at a time when Synopsys is competing fiercely with Cadence for leadership in the EDA industry.
"Maybe Synopsys woke up and saw that it is better to make $10 million mistake than a $350 million mistake," said Erach Desai, a financial analyst at American Technology Research Inc.
The news of the termination pushed Synopsys stock price up 72 cents and MoSys' crashing, down $4.50 to $7.73 on Monday.