PMTC has agreed to acquire MKS Inc. for C$26.20 per share, or
C$293M in cash, subject to shareholder approvals. MKS develops
application lifecycle management software, which helps customers
manage the development of software products. We think this
proposed acquisition will fit well strategically with PMTC's
solutions, which focus on managing the development of hardware.
However, we believe PMTC is overpaying, valuing MKS at an
enterprise value-to-sales ratio of about 4.1X, compared to the
industry average of 3.2X. We expect the deal to be neutral to FY
11 (Sep.) operating EPS.