Synopsys to sell unit for up to US$2.1 billion to private equity firms

(Bloomberg) — Chip design company Synopsys Inc. is selling its software integrity business to two private equity firms for up to $2.1 billion in cash.

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Clearlake Capital and Francisco Partners are buying the cybersecurity-focused business and will run it as a new, as-yet-unnamed, independent company, according to a statement released Monday. Synopsys will receive $1.5 billion at closing, $125 million over five quarters, and up to $475 million depending on a specific rate of return.

The move allows Synopsys to focus on its core business of providing semiconductor design tools, CEO Sassine Ghazi said in the statement. The transaction comes about three months after the company agreed to buy engineering software maker Ansys Inc. for about $34 billion in one of the biggest technology acquisitions in recent years.

The divestiture could boost Synopsys’ margins as the software integrity unit has been a drag on earnings growth in recent years, Piper Sandler analyst Clarke Jeffries wrote in an April note. Synopsys management first disclosed last year that it was considering selling the unit. Some analysts consider the unit’s price of US$2.1 billion to be a discount.

Existing management from the software integrity unit is expected to lead the newly independent company, the companies said. The deal is expected to close in the second half of the year.

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