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Altium’s share price soars on take-over bid

Altium’s share price soars on take-over bid

Altium Limited (ASX:ALU) was floated on the ASX in August 1999 at $2.00 per share, and the market bought into the excitement by driving up the share price to $6.70 by March 2000. 11 years later, the company was going through enormous pain, and this saw the Altuim share price crash to $0.09 by mid-2011, down 98.7 per cent from its record high.

Whilst I’m sure they had many sleepless nights, this didn’t stop the enthusiasm of Aram Mirkazemi, who joined Altium in 1991 and was appointed CEO 23 years later in 2014, or Sergiy Kostynsky, who joined Altium in 2001 and was appointed executive director in 2018; or Sam Weiss, who was appointed non-executive chairman in 2007.

Over the past 12 years, that pain has become a distant memory as the company’s revenue grew from U.S.$48.4 million in Fiscal 2011 to U.S.$263.3 million in Fiscal 2023, whilst its underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) jumped from negative U.S.$0.2 million to positive U.S.$95.4 million.

Last week, Japanese-based Renesas Electronics Corporation, a supplier of advanced semi-conductor solutions, announced a bid for Altium at AU$68.50 per share, to be paid in cash, valuing the company at AU$9.1 billion. This will be financed with bank loans and cash on hand and is not subject to any financing conditions. The price represented a 31 per cent premium to the previous closing price and a 46 per cent premium to Altium’s three-month volume weighted average price (VWAP).

Importantly, Altium’s financial fundamentals seem to be accelerating, and Renesas Electronics is paying 18X EV forecast fiscal 2024 revenue (of U.S.$320 million) and 50X EV forecast fiscal 2024 EBITDA (of $115 million). Management had previously guided to fiscal 2026 revenue to U.S.$500 million (up 56 per cent in 2 years) and underlying EBITDA of U.S.$190 million (up 65 per cent in 2 years).

The Altium acquisition enables the two industry leaders to join forces and establish an integrated and open electronics system and lifecycle management platform for collaboration across component, sub-system and design level design. While Altium will become a wholly owned subsidiary of Renesas Electronics Corporation, the business will be run at an arm’s length with only the support functions integrated.

Pleasingly, Messrs Mikazemi, Kostynsky and Weiss, three of the major drivers of Altium over a very long period, own an aggregate of 13.83 million shares in the company, and between them, they will realise AU$947 million, assuming successful acceptance of the Renesas Electronics bid.

The Montgomery Fund, the Montgomery [Private] Fund and The Australian Eagle Trust Long-Short Fund owns shares in Altium. This blog was prepared 20 February 2024 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Altium, you should seek financial advice.

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Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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