The merger case of Synopsys, Inc. (SNPS.US) and ANSYS, Inc. (ANSS.US) is doubtful in the UK, but the deal is still expected to be approved.

The UK antitrust regulator said in its Phase One investigation results on Friday that a potential deal between electronic design automation companies Synopsys, Inc. (SNPS.US) and ANSYS, Inc. (ANSS.US) could lead to higher prices and reduced competition. However, the regulator stated that it may approve the transaction if concerns are addressed. The Competition and Markets Authority (CMA) in the UK stated: "Following an assessment of the evidence, CMA considers that the merger could reduce choice for customers, who are often large companies operating globally and in the UK, and who rely on these software products. This could lead to a loss of innovation, a decrease in software quality, and/or price increases, which could ultimately be passed on to UK businesses and consumers." Both companies now have the opportunity to address these issues, otherwise the transaction will face a Phase Two investigation. Synopsys, Inc. issued a statement saying that it has taken steps to address the concerns raised by CMA in the Phase One investigation, including deciding to sell its optical solutions business to Keysight Technologies (KEYS.US). Synopsys, Inc. added: "We will continue to cooperate constructively with CMA on the remedies we propose." CMA announced in October that it would conduct an antitrust investigation into the deal. Earlier this month, the two companies announced multiple remedies aimed at obtaining approval from the European Union. In January of this year, Synopsys, Inc. announced that it had agreed to acquire software developer ANSYS, Inc. for $35 billion in cash and stock. At the time of writing, Synopsys, Inc. was down nearly 2% in pre-market trading, while ANSYS, Inc. was down nearly 1%.