Altium shares soar 39pc after Autodesk lobs $5bn bid

US software giant Autodesk swooped with a $5bn takeover offer for ASX-listed Altium, sending the shares almost 40 per cent higher on Monday

Altium revealed that the Nasdaq-listed Autodesk had proposed acquiring the Australian software business for $38.50 per share.

Former high-flying tech darling Altium is preparing its defences following a $5.05 billion takeover bid from US software giant Autodesk, with the company declaring the offer “significantly undervalues” its prospects despite the thumping 47 per cent premium to its recent share price trading.

Altium revealed that the Nasdaq-listed Autodesk had proposed acquiring the Australian software business for $38.50 per share.

This reflected a strong premium to the share price on Friday and close to its highs earlier this year when it was trading near $40 a share.

The takeover offer is also well above the average broker price target of $30.40 a share.

Shares in Altium immediately leapt on the takeover approach, rising $10.62, or 39 per cent, to close at $37.83.

It is believed that Autodesk, which has a market capitalisation of $US62bn ($80.1bn), has been in discussions with Altium for several months to investigate possible partnerships or joint venture deals, but recently changed its approach.

However, the takeover was rejected by Altium on Monday.

“The Altium board appreciates the interest expressed by Autodesk, which has evolved from a dialogue about a strategic partnership,” it said in an ASX statement.

“However, it considers that the proposal significantly undervalues Altium’s prospects and therefore rejects the proposal at the current price.

“Altium 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.

“As consistent with past unsolicited acquisition interest, the Altium board will engage with interested parties in the context of an appropriate valuation of Altium and it will continue to review all potential strategic alternatives for the company.”

Angus Gluskie, managing director of White Funds Management and chairman and CEO of listed investment company Whitefield, said the takeover offer would bring some focus following months of infighting among Altium management and a tussle over the company’s direction.

“Obviously the stock has responded well to the bid, and I think what it brings to shareholders is there has been some dispute and debate around the direction of the company, and this potentially offers some resolution for it,” Mr Gluskie said.

“However, I guess in the context, the outlook and the management direction has been debated for some time.

“ I think there will still be quite a dispute about the offer.”

Whitefield holds Altium stock in its portfolio.

Altium chief executive Aram Mirkazemi.

Mr Gluskie said his LIC would sit on its hands for now and await further details on the bid. Jason Teh, chief investment officer Vertium Asset Management, said the bid set at $38.50 per share valued Altium at an extremely high multiple of 47 times enterprise valuation to earnings based on consensus data – a record high for the stock.

“Altium’s highest ever multiple was recorded in late February 2019 at 42 times EV/EBITDA,” Mr Teh said.

“Of course, the bid has come at an opportunistic time. when earnings are depressed.

“So if we use peak earnings before the Covid crash the bid is valued at about 31 times EV/EBITDA which is in line with Altium’s three-year trading range.

“The key is whether earnings will recover quickly to its pre-Covid highs. The geopolitical situation between Australia and China is worse than a year ago, so there are doubts that Altium’s growth can recover.”

RBC Capital Markets analyst Garry Sherriff, in a note to clients, said it was unlikely Autodesk would return with a substantially higher offer given the already stretched valuations reflected in its initial offer.

“High implied pro forma leverage and the elevated Altium acquisition multiple suggest to us that it is unlikely Autodesk would return with a materially higher bid for Altium. However, Autodesk may incrementally increase its offer in order to gain further engagement from Altium’s board.”

Mr Sherriff said Altium was a high-quality business that had been buffeted by spending cuts from its customers and problems in shifting its business model towards recurring SaaS revenue.

“Unsolicited corporate interest from trade players demonstrates the latent value in Altium as it emerges from Covid and an 18-month downgrade cycle. However, the price offered appears elevated in the absence of detail on material synergies or earnings upside versus consensus, and our back-of-the-envelope analysis suggests that it would be difficult for Autodesk to materially increase its bid,” he said.