Morning Commentary: Mentor Graphics’ 4% convertible bonds pop on Siemens takeover news

By Stephanie N. Rotondo

Seattle, Nov. 14 – The convertible bond market was trending flat in early trading, though with at least one notable exception.

Mentor Graphics Corp.’s 4% convertible notes due 2031 got a sizable boost on Monday, as it was reported that German engineering firm Siemens had agreed to buy the Wilsonville, Ore.-based creator of electronic design automation systems for electrical engineering and electronics.

At mid-morning, the 4% convertibles were seen at 183.75, a gain of nearly 30 points outright. The equity (Nasdaq: MENT) was up $5.67, or 18.5%, at $36.36.

The deal is valued at $4.5 billion, which equates to $37.25 – a 21% premium over Friday’s closing share price.

The news comes at a good time for Mentor, which has been under pressure since September, when activist hedge fund Elliot Management Corp. took an 8.1% stake in the company and declared the stock undervalued.

Meanwhile, Atlas Air Worldwide Holdings Inc.’s 2.25% convertible notes due 2022 were trading busily on Monday.

However, the paper was deemed little changed around 101.

The equity underling the debt (Nasdaq: AAWW) was up $1.45, or 3.03%, at $49.30 at mid-morning.

There hasn’t been any fresh news out on the air cargo operator since Nov. 3, when the company reported its latest quarterly results.

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