Icahn’s Next Move?

It comes as no surprise to this blog that Mentor Graphics is rejecting Carl Icahn’s offer to buy the company. After all, Mentor has in the past turned down bids that valued the company at roughly the same amount as did Icahn’s.

But there is a distinctly disengenuous flavor to Mentor’s reasoning. In a statement, the company insists that the company is worth more than Icahn is valuing it. Specifically, it claims, “Our share price has grown by more than 70% over the last year, for a two year aggregate growth of approximately 200%.”

True, that, but what the company fails to acknowledge is that Icahn’s accumulation of Mentor stock is likely the main driver behind the upswing. One year ago, Mentor’s stock was trading at under $8 a share. It’s now almost twice that. During that time, Icahn boosted his holdings from under 5% to almost 15% of the company. The combination of his large purchases and the inevitable ride on his coattails some speculative investors are taking has no doubt strongly influenced that jump in value. Despite a $125 million jump in revenue, Mentor has lost an cumulative $14.2 million over its past three fiscal years: to suggest investors are simply thrilled by its performance is a difficult assertion to prove.

The company also speaks of — but doesn’t elaborate on — regulatory risks that come with Icahn’s proposed buyout. It’s not clear why a sale to its largest shareholder, one who is tellingly not a competitor, would run afoul of SEC or other rules. 

The relationship between Mentor and Icahn has clearly soured. That was predictable: Few companies welcome Icahn’s type of shareholder “interest.” What’s less clear is what happens next. Will Icahn fold his flag and start selling? Or will he redouble his efforts to pressure the company into a sale?

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About Mike

Mike Buetow is editor-in-chief of Circuits Assembly magazine, the leading publication for electronics manufacturing, and PCD&F, the leading publication for printed circuit design and fabrication. He is also vice president and editorial director of UP Media Group, for which he oversees all editorial and production aspects. He has more than 20 years' experience in the electronics industry, including six years at IPC, an electronics trade association, at which he was a technical projects manager and communications director. He has also held editorial positions at SMT Magazine, community newspapers and in book publishing. He is a graduate of the University of Illinois. Follow Mike on Twitter: @mikebuetow