Why we think Altium (ALU) remains a good bet
Yesterday, technology business Altium was sold off 7.5% to close at $34.30, an ~11% discount to the price they have rejected from suitor AutoDesk (ADSK US). We think the tie up makes strategic sense for AutoDesk and that was a theme discussed in an interview with their product team on Wednesday at a conference in the US.
In simple terms, they believe the rate of change in technology is huge, and underpinning their ability to lead that change is having different cogs in the technology chain at their disposal. When we think about the change in consumer products for example, smart remotes, voice controlled devices, connected fridges and the like, the trajectory of development is staggering. This rate of change in technology that we’ve seen in consumer products is likely to be mirrored in other slower areas such as industrial equipment, and printed circuit boards are central to all of these things.
While the $38.50 proposed offer was a 41% premium to the last close before it was announced, the stocks was trading above $42 in February of 2020. AutoDesk are taking advantage of a soft spot in earnings to buy the business at a discount to what the market was prepared to pay for it pre-covid. Sales have started to recover and similar to past cycles, ALU should enjoy a strong cyclical recovery.
We also know AutoDesk is a natural buyer of other businesses, they’ve made more than 150 acquisitions in the past decade and we think they’ll be successful in buying Altium with a bid north of $40.
