Mentor Graphics Corporation and Valor Computerized Systems, Ltd. announced that the two companies have signed a definitive merger agreement for Mentor Graphics to acquire Valor.

About Valor

On its web page Valor states that its business is to help PCB layout designers to test and validate the PCB design before it is sent for manufacturing. We provide the bare-board manufacturers with CAM (Genesis) tools to better plan and execute the fabrication process. Finally, we assist PCB assemblers world-wide to better manage their cost structure with leading process planning (vPlan) tools, shop-floor monitoring and control software solutions (vManage), and test results and quality information management solutions (vCheck).

Valor has a global presence and provides products and services that are complementary to what Mentor has to offer presently in the PCB market, thus it seems that Mentor will benefit positively from the transaction. The company can expect to increase its revenue by adding accounts that use Valor products for back end development and manufacturing but that do not use Mentor's products for the front end. it is my opinion that both Altium and Zuken will have to pay close attention to this transaction.

The Transaction

Under the terms of the agreement, which was approved by the boards of directors of both companies, Valor shareholders will receive a combination of Mentor Graphics common shares and cash for aggregate consideration of approximately $82 million, equating to approximately $4.60 per Valor share. Subject to satisfaction of regulatory requirements and approval of Valor shareholders, as well as certain closing conditions, the transaction is expected to close during the first calendar quarter of 2010, after which Valor will become a wholly-owned subsidiary of Mentor Graphics. Shareholders owning approximately 50 percent of outstanding shares of Valor have committed to vote in favor of the transaction.

As of October 9, the last day I could find an official price for Valor's stock, on the Xetra European multinational exchange, the stock was trading at $2.60 per share and has never gone above $3.00 during 2009. For 2008 Valor had revenue of $40,432,000, thus the $82 million price for the transaction is almost exactly twice the yearly revenue, although for the first half of 2009 revenue were slightly down to $18,159,000. During 2009, while Maintenance revenue stayed mostly equal to the previous year, revenue for products sales were down almost $2.9 million.
The bottom line is that it is understandable how major Valor stockholders would be in favor of the transaction as Valor stock has not seen a price above the offering price since July 20, 2007 when it reached a high of $4.91.