Synopsys Buy of Ansys Gets China OK. The $35 Billion Deal Is Set to Close.

The companies were awaiting clearance from China’s State Administration for Market Regulation. (David Paul Morris/Bloomberg)

Synopsys stock was falling Monday after the chip-design software company received conditional regulatory approval from China to move forward with its $35 billion acquisition of Ansys.

The two companies were awaiting clearance from China’s State Administration for Market Regulation, having received approval in all other necessary markets. The pair first announced their agreement for the cash-and-stock merger in January 2024. Since then, Synopsys shares have gained 13%, and Ansys stock is up 8%, while the S&P 500 index is up 31% as of last Friday’s close.

Synopsys stock slumped 2.6% Monday, while Ansys gained 2.5%.

The deal could give Beijing additional leverage in trade negotiations with Washington after the countries confirmed the framework of an agreement in June. The U.S. eased restrictions on chip-design exports to China earlier this month, and Beijing is expected to scale back restrictions on rare-earth minerals.

Synopsys and Ansys, respectively, derived more than 16% and around 5% of revenue last year from China.

Synopsys makes chip-design software and simulation equipment, and leads its competitor, Cadence Design Systems in that market. The two are crucial to chip making, and it was important to China to regain access. Ansys makes engineering and physics simulation software.

Synopsys and Ansys have long been partners, and the pairing of their software has become crucial as more products get advanced chips and software. For example, autos are becoming computers on wheels, and it makes sense to develop it all together. The pairing of Synopsys and Ansys creates a single solution for auto design and other industries.

China now joins the U.S., U.K., and European Union in conditionally approving the merger. Synopsys has agreed to make some small divestitures, promised to not bundle the two companies’ offerings, and to continue Ansys interoperability with other software, such as Cadence’s.

Write to Nate Wolf at nate.wolf@barrons.com and Adam Levine at adam.levine@barrons.com