Another One Bites the Dust

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Out of the doorway the bullets rip, to the sound of the beat. Another proposed merger bites the dust.

Cadence Design Systems (Nasdaq: CDNS) has pulled its $1.6 billion bid for rival Mentor Graphics (Nasdaq: MENT), citing reluctance by the Mentor board to "engage in substantive discussions" around the deal. $500 million of the acquisition budget has now been set aside for share repurchase action, nearly doubling the buyback authorization to a total of $912 million.

Mentor acknowledged Cadence's withdrawal, and immediately pointed out that Cadence was having trouble financing the acquisition and that the FTC might have a few objections. The portfolios of the two chip design software specialists are mostly complementary, but the overlap is still large enough that multinational giants like International Business Machines (NYSE: IBM), STMicroelectronics (NYSE: STM), and LSI Logic (NYSE: LSI) would have little choice but working with Cadence/Mentor design packages.

I thought the combination would have made a lot of sense, creating a single vendor that covers more of the chip design pipeline than either company could do on its own, and for what I thought was a pretty fair price. Some of our Motley Fool CAPS players disagreed from the get-go, though, and it looks like they were right. Mentor wouldn't even talk to its suitor without a bigger dowry, and the corporate credit crisis may have been the final straw that broke this camel's back.

First Microsoft (Nasdaq: MSFT) couldn't convince Yahoo! (Nasdaq: YHOO) to take a low bid, and now Mentor pulls the same trick on Cadence. It's tough out on the Street for a matchmaker these days. Are you hanging on the edge of your seat? Let's see how many more mergers will bite the dust this season.

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