Japan’s Renesas to take over Australian tech darling Altium in $9bn deal
Worth just 8c a share at one point, the men behind Australian tech darling Altium came close to folding up. A proposed $9bn takeover will send their wealth into the stratosphere.
A group of six directors and key management at Altium are set to reap almost $1bn from a proposed $9bn buyout of the Australian tech darling by Japan’s Renesas Electronics.
Chief executive Aram Mirkazemi is in line for a $652m payday, if shareholders approve one of Australia’s biggest tech takeovers.
Mr Mirkazemi owns about 9.5 million shares in Altium, based on the company’s latest financial report.
The ASX-listed electronics software maker entered a scheme of implementation agreement on Thursday for Renesas to acquire the company at $68.50 a share.
The all-cash deal sent Altium’s shares soaring more than 28.7 per cent to a record $66 on Thursday.
Others set to reap millions from the deal include chairman Sam Weiss and president Sergey Kostinsky, who are set to receive $130.5m and $164.6m respectively from their shareholdings. Three other directors with smaller shareholdings will also get a windfall.
But while it’s easy to start popping champagne corks, Mr Weiss said that in the late 2000s Altium – which produces printed circuit board design software for the likes of Dell, Karcher and BAE Systems – faced a drastically different situation.
Less than 10 years after the company listed on the ASX, Altium’s share price crashed. “We managed to take the company from $2 to 8c,” Mr Weiss said. “We had a rough period from about 2008 to 2011. So going up to $68 feels a lot better.”
Altium traces its origins to Hobart in 1985, when founder Nick Martin set an ambition to make the design of electronics more affordable via the use of printed circuit boards.
“It was two guys in Hobart who wanted to make something. But the University of Tasmania couldn’t afford the software to do the printed circuit board, so they said ‘bugger it, we’ll make our own’,” Mr Weiss said.
Mr Martin recruited Mr Mirkazemi a few years later and by the early 1990s it had developed the Windows-based printed circuit board system.
“When the whole world wanted software that could run on Windows, we were there first,” Mr Weiss said.
It paved the way for the company’s IPO, a move to the US an eventual turnaround from the stock hitting a low of 8c.
“Excellent is probably not the right word but we had really committed management who were prepared to do the hard work and the willingness to focus on what’s important,” Mr Weiss said.
“So we made a commitment to ourselves that we would only do printed circuit board design software and we cut out a bunch of other things. We would listen to our customers and deliver printed circuit board design software that they valued, and pay attention to our shareholders and deliver increasing revenue.
“This was an old formula I borrowed from Roger Corbett (during his time as chief executive) at Woolworths, which is if you increase your margin, you use some of it in the business but you give some of it to shareholders and that way everybody’s happy. We stuck to that for a long time.”
And Altium’s share price began to soar, with the company being named in the so-called “WAAAX” set of ASX-listed tech darlings – WiseTech, Afterpay, Altium, Appen and Xero. It was coined in early 2019, when WAAAX share prices had doubled on average in the previous 12 months. Since that time, Altium shares have almost doubled again.
Then in November last year, soon after Altium’s annual meeting, its biggest customer Renesas invited Mr Weiss and Mr Mirkazemi for dinner in Sydney.
Mr Weiss said what transpired was competition to see who was more humble: Mr Mirkazemi or Renesas CEO Hidetoshi Shibata.
“These are two enormously successful chief executives with incredible vision and drive,” he said. “And then towards the end, they sort of gently laid this (takeover) out there as to whether we would be happy to discuss this. And we said yes.”
Renesas was granted exclusive due diligence last month before the deal was announced on Valentines Day, US time.
Renesas says Altium brings $US263m ($405m) in revenue to its fold and will operate as its subsidiary on completion of the deal.
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‘We managed to take the company from $2 to 8c. We had a rough period from about 2008 to 2011. So going up to $68 feels a lot better’
Altium chair Sam Weiss
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Its takeover offer represents a 39 per cent premium on Altium’s average share price over the past month, and implies an equity value of $9.1bn and enterprise value of $8.8bn. This represents 18 times full-year revenue estimates.
Mr Weiss said the proposal “is compelling for Altium investors. It is a strong endorsement of the company’s strategy and performance over many years. The directors have unanimously formed the view that the proposal represents attractive and certain value for Altium shareholders.”
Renesas is a supplier of advanced semiconductor solutions. The acquisition is expected to be completed in the second half of 2024, subject to approvals, including from Altium shareholders.
It is the second WAAAX company to be taken over, following Block’s $39bn buyout of Afterpay – the most valuable acquisition in Australian corporate history – in 2022.
Meanwhile, another WAAAX company, Appen, hasn’t fared as well, embarking on $US13.5m worth of cost cuts to plug an $US82.8m hole left on its balance sheet from Google’s shock termination of a lucrative contract.
Altium’s profit surged 19.9 per cent to $US66.34m last year off a similar rise in revenue, which jumped to $US263.3m. It delivered earnings per share of $50.41.
Mr Mirkazemi said Renesas would steer Altium to further growth. “Electronics is the single most critical industry to building a smart and sustainable world. Renesas’s visionary leadership and commitment to making electronics accessible to all resonates strongly with Altium,” he said.
“Having worked closely with Renesas as a partner for nearly two years, we are excited to be part of the Renesas team as we continue to successfully execute and grow.”
The deal also needs approval from the Australian Foreign Investment Review Board and the US Committee for Foreign Investment, given it is headquartered in California.
E&P managing director of technology and gaming research Paul Mason said: “Given unanimous support from the board, as well as the large premium to the prior close, we would expect the transaction to be supported and go through.”
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