Why the Altium (ASX:ALU) share price rocketed 39% higher

Altium was in the spotlight on Monday after its shares rocketed 39% higher for the day…

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The Altium Limited (ASX: ALU) share price was an extraordinarily strong performer on Monday.

The electronic design software company’s shares started the week with a 39% gain to $37.83.

However, despite this impressive gain, the Altium share price is still only trading in line with the market in 2021 with a gain of 9.6%.

Why did the Altium share price rocket higher?

Investors were bidding the Altium share price higher on Monday after it revealed that it had received a formal, non-binding, indicative and unsolicited proposal from Autodesk, Inc. (NASDAQ: ADSK).

Autodesk is a US$62 billion US-based multinational software company. It makes software products and services for the architecture, engineering, construction, manufacturing, media, education, and entertainment industries.

According to the release, Autodesk has tabled a $38.50 per share takeover proposal. This represents a 41.5% premium to its last close price at the time, but also a 4.2% discount to its 52-week high.

How did Altium respond?

The latter discount is something that didn’t go unnoticed by the Altium board, which promptly rejected the proposal on the belief that it undervalues the company.

It commented: “The Altium Board appreciates the interest expressed by Autodesk, which has evolved from a dialogue about a strategic partnership. However, it considers that the Proposal significantly undervalues Altium’s prospects and therefore rejects the Proposal at the current price.”

Though, the board has explained that it would be willing to engage with interested parties if the offer were compelling.

“Altium has a unique position in the electronics ecosystem and in the past unsolicited acquisition interest has developed from partnership dialogues with others in the ecosystem. As consistent with past unsolicited acquisition interest, the Altium Board will engage with interested parties in the context of an appropriate valuation of Altium and it will continue to review all potential strategic alternatives for the Company,” it added.

Will Autodesk return with a better offer?

According to a note out of RBC Capital Markets, its analysts aren’t expecting Autodesk to make a materially improved offer. The broker suspects a small increase could occur in the near future in order to secure further board engagement.

But time will tell if that’s what happens.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Altium. The Motley Fool Australia owns shares of and has recommended Altium. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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