PDA Engineering Agrees to Be Acquired by Rival Company : Technology: MacNeal-Schwendler will pay $65.8 million in deal to create the biggest firm in its part of the software industry.

PDA Engineering Inc., continuing the consolidation in the engineering software industry, said Tuesday that it has agreed to be acquired by a Los Angeles company for about $65.8 million in corporate IOUs.

MacNeal-Schwendler Corp., the industry’s biggest player, said it would pay $6.85 a share for PDA by issuing debt securities to shareholders, who must give the deal their approval.

Both companies provide software that enables engineers to draw a three-dimensional object, such as a design for an airplane wing, and to simulate its strengths and weaknesses.

Though the two companies compete, there is little overlap among their products and customers, and therefore no immediate layoffs are planned, said Larry McArthur, MacNeal-Schwendler’s president. His company will add PDA’s 290 employees to its own staff of 450.

McArthur said he expects most of PDA’s management to remain, though details have not been settled yet. MacNeal-Schwendler acquired a smaller company last year, one of a number of deals in the industry over the past few years.

“We have a chance to take a leadership position in doing this merger,” said Louis Delmonico, PDA’s chief executive. “The timing is right. From a strategic standpoint, this is good for PDA.”

Wall Street reacted positively. PDA stock closed at $5.625 a share, up $2.75, in Nasdaq trading Tuesday. MacNeal-Schwendler stock closed at $12.50 a share, up 75 cents on the American Stock Exchange.

After the sale, the company will record a “substantial” write-off to pay for costs related to the merger, according to a MacNeal-Schwendler press release. The costs include the elimination of some research and development. The amount of the write-off will be disclosed later.

Both MacNeal-Schwendler and PDA have grown quickly in the last few years as computer-aided engineering has blossomed. The software has become popular because it is far quicker to use computers to create and revise engineering drawings than to change designs by hand.

PDA’s products “fit closely with our other products,” McArthur said. In fact, he said, both were started with funding from the National Aeronautics and Space Administration. MacNeal-Schwendler was formed in 1963, PDA in 1972.

For the fiscal year ended Jan. 31, MacNeal-Schwendler reported net income of $11.4 million on sales of $79.6 million, while PDA posted a profit of $4.4 million on revenue of $43.1 million for the fiscal year that ended last June 30. Combined, the two companies will become the largest operation in the industry with about $120 million in sales, McArthur said.

Each company has taken a foothold in various markets among engineers. For instance, PDA has done well selling to engineering analysts at aerospace companies, while MacNeal-Schwendler has focused on designers.

Together, the two companies have tried to expand the engineering analysis market by making their software easier to use and easily adaptable to any kind of computer. Using such techniques, the companies said they hope to expand the market from 100,000 sophisticated engineers who use analysis software to more than 1.5 million.

“It takes years of practice to train people to use most of the software out there,” McArthur said. “We’re trying to take the arcane terminology and procedures out of it.”