Industrial equipment maker Siemens is bulking up its industrial software capabilities with a $4.5 billion deal to acquire U.S. company Mentor Graphics.

Siemens will pay $37.25 per share in cash, which represents a 21% premium to Mentor’s closing price last Friday. Mentor’s board of directors has approved and declared advisable the merger agreement, and has also recommended the approval and adoption of the merger to shareholders.

The acquisition is expected to extend Siemens Digital Enterprise Software portfolio with the addition of Mentor’s electronics IC and systems design, simulation and manufacturing solutions—capabilities that Siemens needs to cater to smart connected products such as autonomous vehicles.

“Siemens is acquiring Mentor as part of its Vision 2020 concept to be the Benchmark for the New Industrial Age. It’s a perfect portfolio fit to further expand our digital leadership and set the pace in the industry,” said Joe Kaeser, President and CEO of Siemens AG.

Based in Wilsonville, Oregon, Mentor has employees in 32 countries worldwide, serving a large, diverse customer base of marquee systems companies and IC/semiconductors companies with over 14,000 global accounts across communications, computer, consumer electronics, semiconductor, networking, aerospace, multimedia and transportation industries. In its fiscal year ended January 31, 2016, Mentor had over 5,700 employees and generated revenue of approximately $1.2 billion with an adjusted operating margin of 20.2%.

Siemens expects the attractive margins to continue and contribute significantly to the Product Lifecycle Management software business of Siemens Digital Factory Division, which Mentor will join. Mentor is viewed as a global leader in strategic industry segments including IC design, test and manufacturing; electronic systems design and analysis; and emerging markets including automotive electronics.

Mentor CEO Walden Rhines said Siemens plans to retain the company’s brand and its Oregon headquarters.

“Siemens is an ideal partner with financial depth and stability, and their resources and additional investment will allow us to innovate even faster and accelerate our vision of creating top-to-bottom automated design solutions for electronic systems,” Rhines said in a statement.