Siemens said it would pay $37.25 per share for U.S.-based Mentor Graphics, a 21 percent premium to Friday's closing price.
Siemens said it plans to use the company, which makes software for designing semiconductors, to extend its "leading Digital Enterprise Software" portfolio.
"Siemens is acquiring Mentor as part of its Vision 2020 concept to be the Benchmark for the New Industrial Age," Siemens President and CEO Joe Kaeser said in a statement. "It's a perfect portfolio fit to further expand our digital leadership and set the pace in the industry."
Mentor Graphics' stock is up 97.01 percent year to date.
—Reuters contributed to this report.