Japan chipmaker Renesas to buy software company Altium for $5.9 billion

[johnboxall]

Japanese chipmaker Renesas Electronics on Thursday said it has agreed to buy Australian-listed electronics design firm Altium for 9.1 billion Australian dollars ($5.9 billion, ¥886 billion) in an all-cash deal.
Renesas will pay AU$68.50 a share, a 34% premium to Altium's Wednesday closing price, and will finance the purchase with bank loans and cash on hand. This will be the biggest acquisition yet of an Australian-listed company by a Japanese buyer.

Altium offers tools for designing circuit boards. Through the deal, Renesas intends to streamline the process of electronics design for customers.

"There is a greater pressure to shorten the time to market," Renesas CEO Hidetoshi Shibata told a news conference.

Headquartered in California and listed in Australia, Altium booked sales of $263 million in the year ended June with an earnings before interest, taxes, depreciation and amortiation margin of 36.5%.

The deal, which has been approved by the boards of directors of both companies, will require approval from Altium shareholders, an Australian court and regulators, Renesas said.

Renesas is a major supplier of automotive and power semiconductors with close ties to Toyota, Nissan and Honda, but has been pushing into more lucrative embedded processors. The company, which acquired U.K.-based Dialog Semiconductor for $6 billion in 2021, has been looking to expand into software services as demand rises for support in integrating semiconductors into increasingly complex products.

"As technology advances, the design and integration of electronic systems is becoming increasingly complex,” the company said in a statement. "Renesas and Altium, under a shared vision, aim to build an integrated and open electronics system design and life cycle management platform.”

Renesas' share price fell as much as 4.9% before paring losses to trade down 0.5% at ¥2,589. Altium shares, which had risen 9.4% this year at the last close, jumped 28% to AU$65.80.

"They don't seem to be overpaying," said Tatsunori Kawai, chief strategist at au Kabucom Securities.

"But the fact (market) players are not reacting positively also means they are still unconvinced about how this deal would contribute to the company's long-term growth," he added.

Altium said its board recommended the deal in the absence of a superior offer and subject to an independent expert concluding it was in the best interests of shareholders.

"Given unanimous support from the board, as well as the large premium to prior close, we would expect the transaction to be supported and go through," analyst Paul Mason at E&P Capital wrote in a client note.

In 2021 Altium rejected a $3.9 billion takeover bid from software company Autodesk as too low. Autodesk later ended talks.

"This is going to help us execute at a faster pace," said Altium CEO Aram Mirkazemi.

The acquisition is the latest by Renesas, which last month said it would buy California-based power semiconductor company Transphorm for $339 million as it focuses on gallium nitride chips that are used in electric vehicles.

The Japanese chipmaker was created in 2010 through a merger of NEC's chip division and Renesas Technology, which itself was established through a merger of the chip operations of Hitachi and Mitsubishi Electric.

https://www.japantimes.co.jp/business/2024/02/15/companies/renesas-buys-altium/

[Analog]

"an independent expert concluding it was in the best interests of shareholders.".  Altium is the best EDA software for shareholders you can get.

[twospoons]

  Altium is the best EDA software for shareholders you can get.

[Shonky]

https://www.eevblog.com/forum/chat/renesas-to-buy-altium

[Uky]

Regardless of which CAD system used, be it Altium, Mentor, Cadence etc. I cannot see that any large organization like automotive would be willing to use a CAD-system that relies on parts of the user data stored "in the cloud". Given the fact that hackers have been able to penetrate even the Pentagon, imagine the consequences of a security breach where data is spread or destroyed at any given time. In my opinion, the use of a CAD-system has to be able to be maintained internal to an organization without any data transfer to an outside service. Be it license servers, data storage or anything else.

[Doctorandus_P]

I do not understand this takeover. With a revenue of USD363M and an "EBITDA margin" of 36.5% you get USD132 M profit. and  5.9e9 / 132.5e6 = 44.5 years to get their money back. And that is without (compound) interest. Or if I turn those 52 years around, the investors get 2% of interest over their investment.

Altium did grow lately, From some USD100M to USD150M of revenue just a few short years ago. The only way I can see this make sense for the investors, is if they expect this trend to continue, so they can get a lot more money out of it then the current numbers suggest.

Can someone with more knowledge of economics explain why these numbers would even make sense?

---------------------
Edit: Fixed typo, USD6.9e9 corrected to USD5.9e9.

[Kean]

I do not understand this takeover. With a revenue of USD363M and an "EBITDA margin" of 36.5% you get USD132 M profit. and  6.9e9 / 132.5e6 = 52 years to get their money back. And that is without (compound) interest. Or if I turn those 52 years around, the investors get 2% of interest over their investment.

Altium did grow lately, From some USD100M to USD150M of revenue just a few short years ago. The only way I can see this make sense for the investors, is if they expect this trend to continue, so they can get a lot more money out of it then the current numbers suggest.

Can someone with more knowledge of economics explain why these numbers would even make sense?

More like 44.5 years as it is 5.9e9 / 132.5e6, but I agree with your general observations.

[thm_w]

Can someone with more knowledge of economics explain why these numbers would even make sense?

The numbers never have to make sense. Companies get bought all of the time that are losing money on their balance sheets.
Obviously the expectation here is that they would either grow the company, cut costs, integrate the tech, etc.

https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/the-six-types-of-successful-acquisitions

[Veteran68]

Regardless of which CAD system used, be it Altium, Mentor, Cadence etc. I cannot see that any large organization like automotive would be willing to use a CAD-system that relies on parts of the user data stored "in the cloud". Given the fact that hackers have been able to penetrate even the Pentagon, imagine the consequences of a security breach where data is spread or destroyed at any given time. In my opinion, the use of a CAD-system has to be able to be maintained internal to an organization without any data transfer to an outside service. Be it license servers, data storage or anything else.

The vast majority of large corporations these days operate almost entirely out of the cloud. The cloud is actually more secure than managing your own infrastructure.

There are many legitimate reasons to question cloud hosting, but this idea of the cloud being more vulnerable is simply false.

[Bud]

Regardless of which CAD system used, be it Altium, Mentor, Cadence etc. I cannot see that any large organization like automotive would be willing to use a CAD-system that relies on parts of the user data stored "in the cloud". Given the fact that hackers have been able to penetrate even the Pentagon, imagine the consequences of a security breach where data is spread or destroyed at any given time. In my opinion, the use of a CAD-system has to be able to be maintained internal to an organization without any data transfer to an outside service. Be it license servers, data storage or anything else.

That is not a problem at all. Banks do their business and store data on all sort of clouds, the major ones usually.

[mikehoopes]

Regardless of which CAD system used, be it Altium, Mentor, Cadence etc. I cannot see that any large organization like automotive would be willing to use a CAD-system that relies on parts of the user data stored "in the cloud". Given the fact that hackers have been able to penetrate even the Pentagon, imagine the consequences of a security breach where data is spread or destroyed at any given time. In my opinion, the use of a CAD-system has to be able to be maintained internal to an organization without any data transfer to an outside service. Be it license servers, data storage or anything else.

That is not a problem at all. Banks do their business and store data on all sort of clouds, the major ones usually.

There’s an Enterprise option to use AWS GovCloud or internal hosting, but I don’t know what CMMC level their GovCloud is currently at; it wasn’t 2 a year ago, but that may have changed.

[voltsandjolts]

Yeh, crazy money to pay for Altium. But these days companies seem to be valued more by number of users, and how much money the buyer thinks can be extracted from them. Hopefully Renesas have a more innovative plan than simply "let's hike the prices".

[Psi]

Hopefully Renesas have a more innovative plan than simply "let's hike the prices".

They must do, no one in their right mind would think Altium is underpriced and think a price increase would increase profit.

Did you see that they want to charge $1200 per user per year for the Altium365 online assembly tool when it goes out of beta phase in a few months.
It's a nice little online feature/tool that make it easy to populate a PCB by hand by providing a nice list of parts you can step through and flag as done. It shows you where each part is in the PCB 3D view including clear pin 1 locations etc..   It's actually a nice tool for manually populating a PCB, but WOW, not $1200 a year per user WTF.   

[voltsandjolts]

$1200 a year per user WTF.

Yeh, especially when there are free options to do something similar!

[Jeroen3]

So a bit like VisualPlace, which is $0?

[free_electron]

large organization like automotive would be willing to use a CAD-system that relies on parts of the user data stored "in the cloud".

Do anything for the US government and the mandate is to be on GovCloud.