Faced with its inability to raise funding for the buyout, Cadence Design Systems has decided to withdraw its offer for Mentor Graphics. Instead, the company is to spend $500m on buying back its own shares.
Cadence blamed Mentor: "Mentor Graphics’ failure to engage in substantive discussions on our all-cash premium proposal prevented us from confirming for our financing sources the significant synergies associated with this transaction."
However, Cadence also lost faith in the deal: "That, along with our revised outlook and the present economic climate, led us to conclude that financing terms for the transaction are no longer attractive for our shareholders."
The share buyback programme is now worth close to $1bn. The market reacted by pushing Cadence's share price up by more than 5 per cent. Mentor's fell 25 per cent as the promise of a cash offer disappeared.
Mentor claimed Cadence's cancellation of the offer was "inconsistent with both Cadence's recent public statements and recent communications between Mentor Graphics and Cadence".