BOSTON - Cadence Design Systems said Tuesday it offered to buy smaller rival Mentor Graphics for $1.6 billion, but the bid was rejected. Cadence, which competes with Mentor in making software that engineers use to design electronic chips, offered $16 cash per share, a 30 percent premium to Mentor's closing stock price on Monday. 
Mentor spokesman Karel Rasovsky declined comment.
Cadence Chief Executive Michael Fister said in an interview that he wanted to buy Mentor to expand Cadence's product portfolio.
Fister said he would like to sell Cadence's software products for constructing computer chips -- which handle problems such as connecting transistors within a single chip -- alongside Mentor's line of programs. He said many of Mentor's products do not compete with those of Cadence.
"If you could couple those thoughtwise, you could get a better solution," he said.
Cadence said its offer gives Mentor an enterprise value of $1.6 billion on a fully diluted basis, reflecting Mentor's net debt of $69 million.
Mentor shares jumped $3.22, or 26 percent, to $15.55 in morning trade on Nasdaq. Cadence shares fell 5 percent to $11.01, also on Nasdaq.
Through Monday, Mentor shares had risen more than 43 percent over the past three months, compared with a 5.2 percent rise for Cadence.
Deutsche Bank Securities is acting as financial adviser to Cadence; Davis Polk & Wardwell is acting as legal counsel. (Reporting by Franklin Paul, editing by Maureen Bavdek and John Wallace)
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