Not necessarily. They could just prefer to be diversified. It can be rational to take a loss of value in the pursuit of diversification (depends on the portfolios of the stakeholders).
They could also think their shares are valued accurately but believe the benefits of synthesis would increase the value.
Right, so Nvidia with their A2 rating and their solid balance sheet in a rock bottom interest rate environment still found it favourable to purchase Arm with newly issued shares.
That's telling us something about what they think about their share valuation right now.
That's not how interest works. "Low rate environments" are low rate because debt is less attractive than in a high rate environment. Debt isn't automatically preferable when interest rates are low - if it were, rates would rise. There's no free lunch.
All it tells you is that they think it's preferable to taking on debt, which in some sense is the position you always start from. Debt has a deadweight cost that you have to overcome.
But we can test your theory. You're saying they thought their shares were overvalued. The market's reaction was the opposite - announcing the deal bumped their share price 7.5%.
They could also think their shares are valued accurately but believe the benefits of synthesis would increase the value.