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IC Industry Buzzes as Synopsys Acquires Avant!

Mountain View, Calif.-based Synopsys Inc. , a provider of electronic design automation (EDA) tools, moved aggressively to consolidate its hold on the IC design tools market with a deal to acquire Avant! Corp. , which creates physical design and transistor-level design tools for the IC industry.

The deal has the semiconductor industry buzzing, with Motorola, NVIDIA, ST Microelectronics, Texas Instruments and TSMC all voicing support for the transaction.

"Synopsys and Avant! are both strategic business partners to TI's development teams, and provide essential technology for the on-time development of products like our highest performance C6000 DSP chip," said Mike Hames, senior vice president, Worldwide DSP Products, TI. "Combining the two companies will certainly result in even faster technology innovation for TI's IC design teams and our customers.

Chris Malachowsky, vice president of engineering at NVIDIA, added, "NVIDIA has been a technology partner of both Synopsys and Avant! for years. We rely on Synopsys Physical Synthesis and Avant!'s SinglePass physical implementation products to tape out advanced, industry leading GPUs like the GEForce3 Ti500 and platform processors like nForce. Both companies have committed technologists and a strong track record of delivering innovation. This merger is great news for NVIDIA and the entire semiconductor industry."

Synopsys said the acquisition would allow it to combine its front-end design tools with Avant!'s back-end tools and MilkyWay database to create a unified toolset for design teams.

"The acquisition of Avant! and its key technology offerings brings our customers proven, advanced physical design technology that is a perfect complement for our Physical Synthesis products," said Aart de Geus, chairman and chief executive of Synopsys. "It allows us to assemble and deliver for our customers what we firmly believe is the best IC design flow in the industry. As an aside, it fulfills the requests we've been hearing from our customers for years to make this acquisition a reality."

Under the deal, Synopsys will issue Avant! shareholders 0.371 Synopsys shares for each outstanding Avant! share. Avant! would become a wholly-owned Synopsys subsidiary under the arrangement. The boards of both companies unanimously approved the definitive agreement. While the acquisition is still subject to approval by shareholders of both companies, Avant!'s directors, and all executive officers holding Avant! shares have agreed to vote their shares in favor of the deal.

The deal is also subject to regulatory approvals, but Synopsys said it anticipates closing the acquisition within three months.

To help ensure the deal goes through, under certain conditions Avant! will be obligated to pay Synopsys a termination fee of $45 million if the transaction is not completed.

Synopsys has also arranged to obtain about $500 million in insurance in regards to pending litigation between Avant! and Cadence Design Systems. In July, a Santa Clara County, Calif. judge ordered Avant! to pay Cadence $182 million in restitution for stealing Cadence's trade secrets. In May, Avant! and some of its executives pleaded no contest to criminal charges of trade secret theft. The judge also ordered that Avant! pay retroactive interest for lost profits and attorney fees.

The insurance policy Synopsys arranged comes at a premium of $335 million. The company said that if ultimate liability and expenses of the litigation are less than $250 million, it will be entitled to a refund of the difference.