Ansys buys Fluent for $565 million

Ansys is to buy Fluent, a global provider of CAE simulation software, for about $565 million, comprising six million shares and about $300 million in net cash.

Ansys has agreed to buy Fluent, a global provider of CAE simulation software.

Under the agreement, Ansys will issue six million shares of its common stock and pay about $300 million in net cash to acquire Fluent, subject to certain adjustments at closing.

The transaction is valued at about $565 million based on the $44.11 per share closing price of Ansys common stock on 15th February 2006.

Ansys will use a combination of existing cash and about $200 million from committed bank financing to fund the transaction.

Fluent is a global supplier of CAE simulation software technologies and services.

Fluent products use computational fluid dynamics (CFD) principles and techniques to let engineers and designers simulate fluid flow, heat and mass transfer, and related phenomena involving turbulent, reacting and multiphase flow.

The company's products are used by blue chip companies, small and medium sized enterprises, and academic institutions and institutes around the world.

Today, CFD simulation technology is used in almost every industry sector and manufactured product, with an annual growth rate of 18% to the end of 2009, according to market research firm Daratech.

The acquisition of Fluent is expected to enhance the breadth, functionality, usability and interoperability of the Ansys portfolio of simulation products.

This will increase operational efficiency and lower design and engineering costs for customers, and accelerate development and delivery of new products.

The combination of Fluent's and Ansys' software products and services is expected to give Ansys one of the most complete, independent engineering simulation software offerings in the industry, reaffirming and strengthening Ansys' commitment to open interface and flexible simulation that are primarily driven by customer demand and choice.

With more than 40 direct sales offices and 17 development centres, on three continents, the combined company will employ about 1350 people.

"We are very excited about the industry leading technologies that Fluent adds to Ansys' simulation capabilities", said James Cashman, President and CEO of Ansys.

"Both companies have a strong commitment to their customers and employees and share a passion for the development of innovative products and services and a history of world-class execution".

"This combination will strengthen these values and will allow us to serve our customers better by accelerating delivery of comprehensive, customer-driven engineering simulation software and by enabling us to provide high quality support throughout the world".

"The simulation technologies that Fluent adds complement and broaden the existing Ansys portfolio of simulation software, enabling the combined company to deliver the integration, functionality and interoperability required by customers across a broad range of industries and applications".

"With total sales of $121.9 million in 2005 (unaudited), Fluent has a combination of strong new software revenue growth and a high level of annually recurring revenue".

"This solid revenue base, combined with its strong profitability, should enable the transaction to be immediately accretive to non-GAAP earnings after the closing".

Bharatan Patel, CEO and founder of Fluent, added: "This merger brings together two great companies with a shared vision and strong engineering focus".

"The combination of our R and D teams and complementary technological strengths will enhance our ability to deliver innovative world-class simulation software technologies to customers".

Ferit Boysan, President and COO of Fluent, said: "The combination of Fluent's extensive portfolio of analysis, engineering design, preprocessing and simulation software with Ansys' existing simulation capabilities creates a best-of-breed company that will continue to lead the evolution and innovation of engineering simulation by enabling customers to improve their product development processes, reduce time-to-market for new products and improve product innovation and performance".

Both companies' boards of directors and the stockholders of Fluent have approved the transaction.

Subject to customary closing conditions and the expiration or termination of the waiting periods under the Hart-Scott-Rodino Act, the transaction is anticipated to close in the second quarter of 2006.

Concurrent with the execution of the merger agreement, Ansys entered into a registration rights agreement with the stockholders of Fluent, which provides that the six million shares issued in the transaction will be registered by Ansys after the consummation of the transaction and, with limited volume exceptions, subjects the stockholder parties to such agreement to a six month lock-up on sales of such shares.

Upon the closing of the transaction, Daniel Blumenthal, a Managing Partner of Willis Stein and Partners, which is the controlling stockholder of Fluent, will join the Ansys board of directors.

Boysan will join Ansys as Vice President and General Manager, reporting directly to Ansys' President and CEO.

Patel will continue to work closely with the combined company to provide his expertise and knowledge to the President and CEO and the board of directors of Ansys under a separate multi-year consulting agreement.

Fluent is a subsidiary of Aavid Thermal Technologies, which is also a provider of thermal management products for the electronics industry.

Before the closing of the acquisition, the thermal management business will be spun-off to the stockholders of Aavid Thermal Technologies, and Ansys will acquire Fluent and the remaining holding companies.

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