(Reuters) -Cadence Design ( CDNS ) said on Thursday it will buy the design and engineering business of Stockholm-based Hexagon AB for 2.7 billion euros ($3.16 billion).

The U.S. chip design software provider will pay 70% of the amount in cash and the rest by issuing shares to Hexagon.

Cadence will have to pay a reverse termination fee of up to 175 million euros, if the deal does not go through.

($1 = 0.8542 euros)

(Reporting by Juby Babu in Mexico City; Editing by Arun Koyyur)