Autodesk's (ADSK) Acquisition Proposal Snubbed by Altium

Autodesk’s ADSK takeover proposal has been declined by Australia-based Altium Limited. In an announcement, Altium stated that the deal is being rejected “at the current price” as it considerably “undervalues” its prospects.

The company further noted that it will hold discussion with all concerned parties for determining an appropriate valuation and evaluate all potential strategic options.

On Jun 6, Autodesk had submitted a non-binding proposal to takeover Altium at AUD$38.50 per share, representing a 41.5% premium to Altium’s closing share price of AUD$27.21 on Jun 4.

Established in 1985, Altium is a software maker that specializes in the development of software utilized by printed circuit board (PCB) designers and electrical engineers. The company’s headquarters are in San Diego, CA with various offices located across the globe.

Autodesk, Inc. Price and Consensus

Autodesk, Inc. Price and Consensus

Autodesk, Inc. price-consensus-chart | Autodesk, Inc. Quote

A Look at Autodesk’s Acquisition Strategy

San Rafael, CA-based Autodesk develops model-based design, engineering and documentation software. Autodesk makes frequent investments in businesses, software solutions and technologies that it deems complementary to the company’s business through acquisitions as well as strategic partnerships.

Autodesk noted that the acquisition of Altium is expected to be complementary to its solutions’ portfolio and will enable the company to accelerate its strategy of converging designing through a combined design, engineering as well as manufacturing cloud platform.

Earlier this year, Autodesk announced a definitive agreement to take over Toronto-based Upchain. The company specializes in providing cloud-based product lifecycle management (“PLM”) and product data management (“PDM”) software solutions.

In Mar 2021, Autodesk completed the $1-billion takeover of Innovyze, Inc, which specializes in development of water infrastructure software solutions. Prior to that, in November 2020, the company purchased Spacemaker AS to strengthen its early-stage design and outcome-based design capabilities.

The acquisitions have enriched Autodesk’s portfolio and position it well to capitalize on the rapid adoption of computer-aided designing as well as manufacturing. Higher demand for the company’s cloud-based products (BIM 360 cloud platform, Shotgun and Fusion Lifecycle), mobile products (AutoCAD 360) and design suites are anticipated to drive the top line, going ahead.

However, Autodesk’s performance has been hampered by the ongoing business model transition from perpetual licenses to cloud-based services and migration of maintenance plan customers to subscription plan offerings. The company expects revenue growth to lag compared with improving sales environment, due to its subscription model in fiscal 2022. Escalating expenses and high debt levels are persistent overhangs.

Currently, Autodesk currently carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks in the broader technology sector worth consideration are Alphabet GOOGL, Facebook FB and Silicon Motion Technology SIMO. Alphabet and Silicon Motion sport a Zacks Rank #1 (Strong Buy), while Facebook carries a Zacks Rank #2 (Buy).

The long-term earnings growth rate for Alphabet, Facebook and Silicon Motion is currently pegged at 18.1%, 20.1% and 8%, respectively.

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