Contrary to recent media reports, Altium Limited (ASX: ALU) advises the company has received no further takeover offers from Autodesk Inc. (NASDAQ: ADSK).
Autodesk previously made a $38.50 per share proposal to acquire 100% of Altium shares. This valued Altium at $5 billion however the offer was rejected by the Altium board.
Before entering a trading halt shares in Altium fell over 14%. Following the announcement, Altium shares have recovered to be down 4.43% to $34.93.
ALU share price
What was reported?
The Australian reported that Autodesk had upped its original offer to around $40 per share with the original conditions attached. This would value Altium at approximately $5.25 billion.
Those conditions included allowing Autodesk to undertake due diligence on Altiums books in addition to the board endorsing the offer.
The offer was again declined by Altium.
Nothing to see here
The announcement authorised by Chairman Samuel Weiss read:
“In response to media spculation today, Altium Limited advises that it has not received any further offer from Autodesk. All details relating to the Autodesk offer have been disclosed by the Company in its ASX announcement released to the market on 7 June 2021”.
The board did not confirm if the original offer by Autodesk remained on the table or if the two companies were engaging in further discussions.
What will it take?
In its recent investor presentation, Altium reaffirmed its goal for $500 million in revenue by 2025.
The company also stated its ambition for earnings before interest, tax, depreciation and amortisation (EBITDA explained) margin between 39% to 44%. This would imply an FY25 EBITDA between $134 million and $186 million.
Using the above ambitions as a forecast, Autodesk’s offer values Altium at 10x FY25 revenue or between 26x to 37x FY25 EBITDA.
These are pretty lofty numbers on their own, let alone in four years time.
The Altium board and shareholders will reference that the share price traded above $40 prior to COVID-19 therefore any proposal will need to be at a premium to that.
However, it’s dangerous to anchor valuation to price charts.
My take
After reviewing the proposal, I think it’s very reasonable.
Autodesk is a $64 billion global software behemoth and would be able to scale Altium’s offering in addition to the cost synergies of the two companies.
Altium’s sales are slowing and its ambition of integrating the entire printed circuit board supply is just a goal at this stage.
I’ve also noted two other red flags in the latest trading update here.
While it would be a loss to the Australian share market to lose a quality software company, I believe it’s time to take the offer.
