Insights for Investors by Investors

Is it time to sell Altium?


The Altium Limited (ASX: ALU) share price is going bananas right now after revealing a takeover offer from US software group Autodesk (NASDAQ: ADSK).

Why is the Altium share price going nuts?

The electronic PCB software business revealed that it has received a formal, non-binding, indicative and unsolicited takeover proposal from Autodesk. My colleague Lachlan Buur-Jensen was right when he speculated that it could be Autodesk.

Autodesk’s offer for Altium is $38.50 per share.

If you haven’t heard of Autodesk before, it’s a global software business that makes software products and services for the architecture, engineering, construction, manufacturing, media, education and entertainment industries. It has a market cap of US$62 billion.

What was the responce?

The Altium board said it appreciated the interest, which has evolved from talking about a strategic partnership, but believes the offer significantly undervalues Altium’s prospects and therefore the board rejects the proposal at the current price.

Altium said that it has a unique position in the electronics ecosystem and in the past unsolicited acquisition interest has developed from partnership dialogues with others in the ecosystem. The board said it would engage with interested parties about an appropriate valuation and will continue to review all potential strategic alternatives for the company.

Why so confident?

An offer that was so much higher than the last share price shouldn’t be easily dismissed. But Altium seems confident about the future.

The board said that it has a strong track record of setting ambitious long-term goals and achieving them, which gives the Altium board confidence in the company’s ability to pursue its transformative strategy for the electronics industry and to achieve its 2025 financial goals. Having pivoted to the cloud, Altium said it’s now well-positioned to pursue market dominance and industry transformation. It’s turning into a software as a service (SaaS) business.

Summary thoughts on Altium and the share price

Altium is a very high-quality business. It’d be a shame for the ASX to lose its presence because it has a very promising future. I’m not sure how much higher the Autodesk offer would have to be before Altium would consider an offer. I’d guess at least in the $40s.

As an Altium shareholder, this offer is very welcome as it has boosted the Altium share price significantly. But, I’m going to hold on – there could be a higher bid coming. It speaks volumes of management’s confidence for the long-term.

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