Synopsys: A Reported Bid for Ansys Would Bring In an Excellent Franchise, but Might Be an Overpay

On Dec. 22, shares of narrow-moat Synopsys fell 6% as The Wall Street Journal reported, citing unnamed sources, that the company is in talks to acquire wide-moat Ansys. A subsequent Reuters sources report suggested that Ansys is receiving acquisition offers at “well over $400 per share,” which appears rather high to us compared with our $262 fair value estimate for Ansys and, in our opinion, explains the selloff in Synopsys’ shares. We maintain our $480 fair value estimate for Synopsys but may adjust our valuation when more information arises, or further actions take place.