Mentor Graphics’ convertible bonds pop on Siemens takeover news; Atlas Air active, steady

By Stephanie N. Rotondo

Seattle, Nov. 14 – The convertible bond market was trending flat in Monday 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 for electrical engineering and electronics.

A market source placed the issue in a 182 to 183 context. That compared to previous levels around 155.

At mid-morning, the 4% convertibles were seen at 183.75, a gain of nearly 30 points outright.

The equity was up $5.61, or 18.29%, at $36.29.

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.

The investor said in a statement on Monday that the Siemens deal was a “great outcome” for shareholders and customers alike.

The deal is expected to close in the second quarter of 2017.

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.

Another source pegged the convertibles at 100.625 bid, 101.125 offered.

The equity underling the debt gained $2.65, or 5.54%, to close at $50.50.

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

For the third quarter, the Purchase, N.Y.-based company reported a net loss of $7.9 million. The year before, net loss was $12.8 million.

The company said the bottom line was impacted by the exercise of warrants held by Amazon linked to long-term dry lease and operating agreements inked in May.

Consolidated revenue declined slightly to $448 million, while expenses rose 5.3%, to $422 million.

Operating profit declined 46.9% to $26 million.

Mentioned in this article:

Atlas Air Worldwide Holdings Inc. Nasdaq: AAWW

Mentor Graphics Corp. Nasdaq: MENT

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