Cadence Design Systems, which makes software used to develop computer chips, has gone hostile in its bid to acquire electronics testing software maker Mentor Graphics after the latter spurned its friendlier advances. Now, Cadence has unveiled an offer of $16.00 per share, or one worth $1.6 billion when including Mentor's debt. The offer represents a 29.8 per cent premium from Monday's $12.33 closing price of Mentor stock.

Cadence is of the opinion that buying Mentor, whose software helps test chip models, will allow customers to design products faster. Mentor's board rejected overtures from Cadence last month, prompting the latter's CEO Michael Fister to make the bid public, hoping that Mentor shareholders may bring pressure to bear on the management.

Both the companies are US-based, with Cadence in California and Mentor headquartered in Oregon. They can be considered as two of the founders of the electronic design automation (EDA) industry for electrical engineering and electronics, with Cadence and Mentor occupying the first and third positions by revenue.

Cadence has sought to engage Mentor in talks for the past two months with little success, Fister said.

''I hope that the next step is that they'll work cooperatively with us,'' he added. ''If not, we're very thoughtful and well advised and prepared to drive it to its conclusion.'' He declined to say whether he would seek to oust Mentor's directors and install a board that's willing to negotiate.

Combining with Mentor will help Cadence trim operating expenses as growth in the chip industry slows, Fister said. Cadence, which counts International Business Machines Corp. (IBM) and NVIDIA Corp. among its clients, reported $1.07 billion in operating expenses last year, a 6 per cent increase.

''The semiconductor industry is not growing at the rate that it has historically grown,'' Fister said. Customers are ''so driven to pare their costs back. It drives everything, drives all their motivation around efficiency and productivity.''

Mentor is no stranger to hostile buyout offers, having made one for Flomerics Group Plc, a UK-based maker of thermal-analysis software. Flomerics rejected the offer, worth about $50 million, last month. Last week, Mentor extended the deadline for shareholders to accept the offer until 23 June.

Yesterday's offer comes a year after Cadence itself was the subject of takeout speculation. Back then its stock surged to what was a new 52-week high on reports that the company was in talks with private equity firms about a possible buyout.

Deutsche Bank Securities Inc. provided financial advice to Cadence, while Davis Polk & Wardwell gave legal counsel.