EXHIBIT 13
August 21, 1998
Confidential
- ------------
The Board of Directors
Quickturn Design Systems, Inc.
55 West Trimble Road
San Jose, CA 95131
Gentlemen:
You have requested our opinion as to the adequacy, from a financial point
of view, to the holders of the outstanding shares of common stock, par value
$0.001 per share (the "Common Stock") of Quickturn Design Systems, Inc.
("Quickturn" or the "Company"), other than Mentor Graphics Corporation
("Mentor"), of the terms of the Offer to Purchase (as hereinafter defined). For
purposes of this opinion, the "Offer to Purchase" means the offer described
below pursuant to that certain Offer to Purchase included in the Schedule 14D-1
filed with the Securities and Exchange Commission on August 12, 1998 by MGZ
Corp, (the "Bidder"), a wholly-owned subsidiary of Mentor.
As more specifically set forth in the Schedule 14D-1, the Bidder has
offered, subject to certain conditions set forth in the Offer to Purchase, to
purchase all the outstanding shares of Common Stock of the Company, and the
associated preferred stock purchase rights issued pursuant to the Rights
Agreement between the Company and the First National Bank of Boston, dated
January 10, 1996, as Rights Agent (the "Rights Agreement"), at a purchase price
of $12.125 per share (and associated right) net to seller in cash.
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Board of
Directors of Quickturn in connection with the proposed Offer to Purchase, and we
will receive a fee for our services. We will also receive a fee upon delivery
of this opinion.
In the past, we have provided investment banking and other financial
advisory services to Quickturn and Mentor and have received fees for rendering
these services. Hambrecht & Quist served as co-manager in the Company's
December 15, 1993 initial public offering, advised the Company in the January
10, 1996 adoption of its Shareholder Rights Plan, advised the Company in its
February 1997 merger with SpeedSim, Inc., and advised the Company in its June
1997 acquisition of the assets of Arkos Design, Inc. Hambrecht & Quist was
engaged in March 1998 to pursue the possible sale of a business unit of Mentor
unrelated to the electronic design automation business. This engagement, which
has been inactive for several months, has now been terminated by
Hambrecht & Quist. In the ordinary course of business, Hambrecht & Quist acts as
a market maker and broker in the publicly traded securities of Quickturn and
Mentor and receives customary compensation in connection therewith, and also
provides research coverage for Quickturn and Mentor. In the ordinary course of
business, Hambrecht & Quist actively trades in the equity and derivative
securities of Quickturn and Mentor for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities. Moreover, Hambrecht & Quist and its affiliates own 40,000
shares of Common Stock of the Company.
In connection with our review of the proposed Offer to Purchase, and in
arriving at our opinion, we have, among other things:
1. reviewed the publicly available consolidated financial statements
of Quickturn for
recent years and interim periods to date and certain other relevant financial
and operating data of Quickturn (including its capital structure) made available
to us from published sources and from the internal records of Quickturn;
2. reviewed the Offer to Purchase, the Schedule 14D-1 and certain
related documents;
3. reviewed certain internal financial and operating information,
including certain projections, relating to Quickturn prepared by
the management of Quickturn;
4. discussed the operations, business strategy, financial
condition and prospects of Quickturn with certain of its
officers;
5. reviewed the publicly available consolidated financial statements
of Mentor for recent years and interim periods to date and
certain other relevant financial and operating data of Mentor
made available to us from published sources;
6. reviewed the recent reported prices and trading activity for
the common stocks of Quickturn and Mentor and compared such
information and certain financial information for Quickturn and
Mentor with similar information for certain other companies
engaged in businesses we deemed comparable;
7. reviewed the financial terms, to the extent publicly available,
of certain comparable merger and acquisition transactions; and
8. performed such other analyses and examinations and considered
such other information, financial studies, analyses and
investigations and financial, economic and market data as we
deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Quickturn or Mentor considered
in connection with our review of the proposed Offer to Purchase, and we have not
assumed any responsibility for independent verification of such information. We
have not prepared any independent valuation or appraisal of any of the assets or
liabilities of Quickturn or Mentor, nor have we conducted a physical inspection
of the properties and facilities of either company. With respect to the
financial, forecasts and projections made available to us and used in our
analysis, we have assumed that they reflect the best currently available
estimates and judgments of the expected future financial performance of
Quickturn and Mentor. For purposes of this opinion, we have assumed that
neither Quickturn nor Mentor is a party to any pending transactions, including
external financings, recapitalizations or material merger discussions, other
than the proposed Offer to Purchase and those activities undertaken in the
ordinary course of conducting their respective businesses. Our opinion is
necessarily based upon market, economic, financial and other conditions as they
exist and can be evaluated as of the date of this letter and any change in such
conditions would require a reevaluation of this opinion.
We were not requested to, and did not, solicit indications of interest from
any other parties in connection with a possible acquisition of, or business
combination with, Quickturn.
It is understood that this letter is for the information of the Board of
Directors and may not be used for any other purpose without our prior written
consent; provided, however, that this letter may be reproduced in full in the
14D-9. This letter does not constitute a recommendation to any stockholder as
to whether to tender shares of Common Stock pursuant to the Offer to Purchase.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be received by the holders of the Common Stock in the
proposed Offer to Purchase is inadequate, from a financial point of view, to
such holders.
Very truly yours,
HAMBRECHT & QUIST LLC
By /s/ Paul B. Cleveland
---------------------
Paul B. Cleveland
Managing Director