Mentor Graphic’s looming showdown

Contact: Brenon Daly

Lost in the din surrounding Carl Icahn’s recent effort to take out Lawson Software is the fact that the activist shareholder is already much further along with his stirrings against another target, Mentor Graphics. In less than two months, the electronic design automation company is slated to hold its annual shareholder meeting – a get-together where Icahn hopes to replace several board members as a way to spur a sale of the company. It’s shaping up to be a real showdown.

Last month, Icahn floated an offer of $17 for each of the roughly 112 million shares of Mentor, giving the unsolicited bid an equity value of $1.9bn. (Icahn already owns 15% of Mentor, which is nearly four times more than all the company’s directors and executives hold collectively.) Icahn has been joined in his efforts – in practice, if not officially – by another hedge fund, Casablanca Capital, which has a 5% stake in Mentor.

Mentor has told its shareholders to stick with its current board and strategy. In the proxy filed Tuesday, the company takes a swipe at Icahn’s efforts, saying his selections to the board lack ‘the collective knowledge, skill and experience’ of the current directors. Recall that Mentor’s ‘just say no’ defense successfully stymied an unsolicited bid from rival Cadence Design Systems nearly three years ago. Cadence pulled its offer just two months after launching it, but not before blasting Mentor for refusing to even open its books to a prospective buyer. We doubt that Icahn will go away as quickly and quietly if Mentor continues to stiff-arm him