Synopsys' $10 Billion Bond Sale: A Strategic Move to Finance Ansys Acquisition

Synopsys Inc., a leading provider of software for designing computer chips, is set to sell around $10 billion of bonds as early as next week to finance its $34 billion acquisition of software maker Ansys Inc., according to people with knowledge of the matter. The bond sale, which would be the largest non-financial deal this year, comes after Synopsys reported quarterly results that beat consensus estimates and recently won conditional approval from the European Union's merger watchdog for the planned buyout.



The Sunnyvale, California-based business agreed to buy Ansys in January 2024 for about $34 billion in cash and stock, which at the time was the second-largest ever bridge loan for a merger in the technology sector. The acquisition is expected to create a leader in silicon to systems design solutions, combining Synopsys' EDA solutions with Ansys' simulation and analysis portfolio. This strategic move is anticipated to expand Synopsys' total addressable market (TAM) by 1.5x to ~$28 billion, growing at ~11% CAGR, and deliver high-growth, high-margin, recurring revenue.



The bond sale is expected to come after Synopsys reports quarterly results that beat consensus estimates and recently won conditional approval from the European Union's merger watchdog for the planned buyout. The company has enlisted Bank of America Corp., HSBC Holdings Plc, and JPMorgan Chase & Co. to arrange a series of fixed-income investor calls on Friday, with the debt sale expected to be the biggest non-financial deal this year.



The bond sale is a strategic move for Synopsys, as it takes advantage of favorable market conditions with financing costs near year-to-date lows. The company is expected to expand its non-GAAP operating margins by ~125 basis points and unlevered FCF margins by ~75 basis points in the first full year post-closing, indicating improved operational efficiency and profitability. Additionally, the acquisition is expected to be accretive to non-GAAP EPS within the second full year post-close and substantially accretive thereafter, signaling potential long-term value creation for investors.

In conclusion, Synopsys' planned $10 billion bond sale is a strategic move to finance its acquisition of Ansys, which is expected to create synergies and strategic advantages for the combined company. By taking advantage of favorable market conditions and expanding its TAM, Synopsys is well-positioned to deliver long-term value to its shareholders.