Altium rejects $5 billion bid by US tech giant Autodesk

ASX-listed software maker Altium has knocked back a $5 billion takeover offer from US design technology heavyweight Autodesk, but has left the door open to a higher offer.

Altium’s board said on Monday it had received a non-binding, indicative and unsolicited proposal from Autodesk offering $38.50 per share via a scheme of arrangement. It said the offer evolved from a dialogue about a strategic partnership with the $US62 billion Autodesk, which is known for its computer-aided design software AutoCAD.

“The Altium board appreciates the interest expressed by Autodesk ... however, it considers that the proposal significantly undervalues Altium’s prospects and therefore rejects the proposal at the current price,” the company said in a statement to the ASX.

The last three words did not go unnoticed by analysts and investors.

“The company, to me, has said they are open to exploring a bid,” said TMS Capital’s Ben Clark. “It’s obviously got to be improved.”

Altium chief executive Aram Mirkazemi could make or break any bid for the company, say investors. Credit: Ben Rushton

Mr Clark added that Altium’s chief executive Aram Mirkazemi would play an influential role in any bidder’s success with his substantial shareholding.

“There’s going to be more talks to come between the two (parties). It’s really going to come down to what Aram wants to do as a big shareholder of Altium. He can kill, or make this deal happen.”

RBC Capital’s Garry Sherriff agrees that there is more to come, but said the high multiples suggest a materially higher offer from Autodesk is unlikely.

“However, Autodesk may incrementally increase its offer in order to gain further engagement from Altium’s board,” Mr Sherriff said.

Altium is one of the five heavyweight technology stocks on the ASX that trade on incredibly high earnings and revenue multiples. The Autodesk offer for Altium is at 75 times the ASX-listed company’s 2022 earnings, according to analysts.

Altium was valued at $3.6 billion before Autodesk’s pursuit was made public, with its shares trading at $27.21. Investors welcomed Autodesk’s interest in Altium, with shares soaring to a high of $38.26 - up more than 40 per cent - on the back of the news.

The rejection from Altium, which develops software used to design electronic circuitry for a host of goods connected to the internet, comes despite a slew of downgrades announced by the company.

The stock had traded as high as $42 last year before the company downgraded its revenue targets.

Altium has recruited Goldman Sachs for its defence while Morgan Stanley is advising Autodesk.

Jarden Securities thinks a rejection of Autodesk’s offer is not in Altium’s best interests.

“We see near-term earnings risk and limits to Altium’s long-term growth compared to peers,” said Jarden analyst Elise Kennedy.

“We think this potential acquisition could broaden Altium’s total addressable market beyond the PCB (printed circuit board) market, and could help drive product adoption through cross-sell to Autodesk’s customers,” she said.

Altium has struggled with the pandemic last year, and missed its $US200 million revenue target for the year. The company said it may take another six to 12 months to achieve its 2025 revenue goal of $US500 million due to the impact of COVID-19.

In January, the company warned of a 3 per cent revenue decline for the December half year and said it would provide an update on the 2025 target, citing the sale of its Tasking business.

In February, the company posted its first revenue decline in a decade. The company has described its long-term goal is to create a digital platform to manage the design, manufacture and distribution of goods for the $US2 trillion global electronics industry.

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