FRANKFURT (Reuters) - Siemens <SIEGn.DE> agreed to buy U.S.-based Mentor Graphics <MENT.O> in a $4.5 billion cash deal that will further enhance the German engineering group's industrial software capabilities.
Siemens said on Monday it would pay $37.25 per share for Mentor Graphics, which makes software for designing semiconductors, a 21 percent premium to Friday's closing price.
Siemens Chief Executive Joe Kaeser has set out to reshape the group, a household name in Germany, to make it more profitable and more agile by selling off non-core businesses and investing in areas promising faster growth and fatter margins.
One such area is software where Siemens increasingly competes with firms that can develop technology faster because that is their sole focus. Earlier this year, Siemens bought CD-adapco, a privately held U.S. engineering software firm, for close to $1 billion.
Siemens said last week that it planned a public listing of its $15 billion healthcare business, which pushed its shares to a 16-year high as investors hoped for an injection of capital to boost its valuation while funding new investments.
Wilsonville, Oregon-based Mentor Graphics "will complement our strong offering in mechanics and software with design, test and simulation of electrical and electronic systems," Siemens management board member Klaus Helmrich said in a statement.
People familiar with the matter had flagged the planned deal to Reuters, saying Siemens would pay $4.5 billion to $4.6 billion for Mentor.
Siemens said it expected the acquisition to add to its earnings per share within three years and to lift earnings before interest and tax (EBIT) by more than 100 million euros ($108 million) within four years.
Siemens shares traded 1.3 percent higher at 0900 GMT.
The U.S. firm generated revenues of around $1.2 billion in its fiscal year through the end of January, with an adjusted operating margin of 20.2 percent.
Mentor has been under pressure since activist hedge fund Elliott Management Corp reported an 8.1 percent stake in the company in September and said its shares were deeply undervalued.
It had been no stranger to activist investors or takeover offers over previous years.
Billionaire activist Carl Icahn won a proxy fight in 2011 that secured him three board seats, although he quit his investment in the company in April after six years. Mentor Graphics also fended off a hostile takeover by rival Cadence Design Systems Inc <CDNS.N> in 2008.
Deutsche Bank and JP Morgan advised Siemens on the transaction.
(Reporting by Maria Sheahan; Additional reporting by Liana Baker; Editing by David Goodman and Victoria Bryan)