On Thursday, William Blair issued a rating change for Altair Engineering (NASDAQ: ALTR), downgrading the stock from Outperform to Market Perform following the announcement of its acquisition by Siemens (SIE-DE, €179.48) for an estimated $10.6 billion in cash.
The definitive agreement, announced after the market closed on Wednesday, October 30, will result in Altair shareholders receiving $113.00 per share, which is a 19% premium over the share price prior to deal rumors reported on October 22 and a 13% premium over Altair's all-time high unaffected closing price.
The transaction, which is anticipated to be finalized in the second half of the calendar year 2025, is subject to customary closing conditions. The acquisition price suggests a valuation of 14 times revenue and 63 times EBITDA based on consensus calendar 2025 estimates. Siemens plans to fund the acquisition with its available cash reserves.
This acquisition follows reports on October 22 that Altair was considering a sale process. The agreed price reflects a significant premium to Altair's share value before the news of the potential sale broke out. The premium is also higher than the company's peak closing price when not under the influence of acquisition speculation.
William Blair's downgrade reflects the view that a substantially higher bid for Altair is unlikely, given the scale of the companies involved and the size of the transaction. The parties reported to be involved in the process have reached an agreement that seems to satisfy the current terms of the deal.
In other recent news, Altair Engineering Inc. has reported a significant increase in Q2 2024 earnings, with total revenue reaching $148.8 million and software revenue hitting $135.4 million, reflecting a 10.6% year-over-year increase.
This growth has been attributed to a strong performance in the aerospace and defense sector and the release of enhanced AI capabilities in Altair HyperWorks 2024. Additionally, Altair expanded its reach with the acquisition of Metrics Design Automation, contributing to its simulation-as-a-service offerings.
Altair is also considering expressions of takeover interest, as reported by Oppenheimer, which maintained its positive stance on the company. Potential acquirers include Cadence Design (NASDAQ:CDNS) Systems, Autodesk (NASDAQ:ADSK), Dassault Systèmes, Siemens, Honeywell (NASDAQ:HON), and General Electric (NYSE:GE). The acquisition price for Altair is speculated to be between $105 and $110 per share.
Furthermore, Altair, in collaboration with the Technical University of Munich, made a significant breakthrough in quantum computing, particularly in computational fluid dynamics. This development could notably increase the model size and scalability of simulations compared to classical computing methods. Altair's ongoing efforts in quantum computing also include its investment in Riverlane, a company focused on quantum error correction.
Lastly, Altair expressed gratitude for the ongoing support from Matrix Capital Management, which decided to maintain its full investment position in the company. Analysts from Gartner (NYSE:IT) recognized Altair's leadership in data science and machine learning, reinforcing the company's position in the computational intelligence landscape. These are among the recent developments that continue to shape Altair's trajectory in the engineering software solutions market.
InvestingPro Insights
Recent InvestingPro data provides additional context to Altair Engineering's acquisition by Siemens. The company's market capitalization stands at $9.22 billion, which aligns closely with the $10.6 billion acquisition price, suggesting Siemens is paying a reasonable premium. Altair's revenue for the last twelve months as of Q2 2024 was $627.21 million, with a robust gross profit margin of 80.92%, indicating a strong core business that likely attracted Siemens' interest.
InvestingPro Tips highlight Altair's impressive performance leading up to the acquisition. The company has demonstrated strong price momentum, with a 74.87% price return over the past year. This trend is further supported by the stock trading at 96.03% of its 52-week high, reflecting investor confidence in Altair's prospects.
These insights underscore the rationale behind Siemens' acquisition and the premium offered. For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for Altair Engineering, providing a deeper understanding of the company's financial health and market position.
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