PALO ALTO, California -- Mentor Graphics said on Tuesday it was prepared to raise its takeover bid for Quickturn Design Systems, and it filed a lawsuit in an effort to stop Quickturn's proposed acquisition by Cadence Design Systems.
Mentor (MENT), in papers filed in the Delaware Chancery Court, asked the court to block Cadence's bid for Quickturn, declare the companies' merger pact void, and force the Quickturn board to auction the company to the highest bidder.
The moves were the latest in the acrimonious takeover battle begun by Mentor in August. The Wilsonville, Oregon, company offered US$216 million for Quickturn (QKTN), a publisher of diagnostic software that tests semiconductor designs.
Cadence (CDN) emerged as a white knight last week when it offered to buy Quickturn in a stock swap worth $253 million, or $14 per share. Mentor's competing bid is $12.125 per share in cash.
Mentor, which makes software that designs semiconductors, said it was prepared to raise its bid above $14 a share. It said any new offer would be shaped by due diligence demonstrating greater value for Quickturn.
In its suit, Mentor also sought an injunction against several lockup provisions agreed to by Quickturn if its acquisition by Cadence does not go through.
The provisions include Quickturn's agreement not to shop the company, payment to Cadence of a $10.6 million termination fee, reimbursement for expenses of $3.5 million, and an option that would allow Cadence to buy 19.9 percent of Quickturn's stock at $14 a share.
Mentor said it would "evaluate its alternatives with respect to its existing tender offer for all of Quickturn's outstanding stock for $12.125 cash per share." The offer is to expire at midnight 11 January 1999.
On 8 January, Quickturn shareholders are scheduled to vote on whether to replace their board of eight directors with a board of five directors nominated by Mentor. The special shareholder meeting, adjourned two times previously, will be reconvened in Delaware, where Quickturn is incorporated.
In its lawsuit, Mentor alleged that Quickturn directors had breached their fiduciary duty by failing to get the best price for the company, failing to deal fairly with Mentor, and agreeing to the lockup provisions with Cadence.
Mentor alleged that Cadence, which makes electronic design-automation products, knowingly aided and abetted the alleged breaches of fiduciary duty.
Cadence is seeking to offer one-stop shopping to chipmakers who produce the increasingly complex heart of personal computers.
Quickturn shares were up 75 cents at $14.56 in early-afternoon trading. Mentor Graphics was unchanged at $8.63. Cadence was up 81 cents at $26.06.
Copyright© 1998 Reuters Limited.
