Buying Altium shares amid blockbuster takeover deal? What you need to know

It's an exciting time to own Altium shares.

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Altium Limited (ASX: ALU) shares have had a very good week, rising by 28% after accepting a takeover offer. In fact, Altium shares are up 43% in the past month and 79% in six months.

Investors may be wondering about buying Altium shares and what happens next. So, let's have a look at what may happen.

Offer accepted

Tokyo-based Renesas Electronics, a supplier of advanced semiconductor solutions, is the business that's trying to buy Altium.

Under the proposal, Altium shareholders will receive A$68.50 per share in cash. At the moment, the Altium share price is trading at around $66, which is around 3.8% below the takeover offer.

So, if shareholders want to exit now, they can get almost all of the potential value of this takeover deal without having to wait for many months.

Why is there a discount? I'd suggest it's because of two main reasons. First, the takeover still has a number of steps to go through – it's not guaranteed to happen.

There's also a time cost. Investors recognise that money could get a safe return in a savings account or bond with an annual interest rate of 4% or 5%. As the takeover date approaches, I'd expect the discount to close up because there's less time until the deal goes through (and less missed potential interest from a bond/savings account).

Unless there's a bigger takeover offer, that approximately 4% return is the most investors will get from here.

What next for the Altium takeover?

The offer has a very good chance of going ahead because of how large it is.

Renesas' offer gives Altium an equity value of A$9.1 billion. The offer is a 31% premium to the all-time high closing Altium share price on 12 February 2024.

The Altium board has unanimously recommended that shareholders vote in favour of the takeover in the absence of a superior proposal and subject to an independent expert concluding (and continuing to conclude) that the offer is in the best interests of Altium shareholders. Assuming those qualifications are ticked off, Altium's directors plan to vote their collective 13.8 million Altium shares in favour of the deal.

There are a few steps that still need to happen before the takeover can be completed.

It needs owners of Altium shares to vote to approve the deal at a meeting later this year. It requires regulatory approvals, the positive assessment of an independent expert, no Altium 'material adverse change' and no 'prescribed events'. These are usual for a transaction like this.

Altium is planning to send a booklet to shareholders which will contain important information once the timing of all regulatory approvals is clear. The shareholder meeting will take place to vote after that. The takeover will then be submitted for final court approval.

At this stage, there are no dates, but Altium expects final court approval prior to the end of the year and "hopefully well before that time." Owners of Altium shares will receive their cash around the time that the takeover is implemented and it's de-listed from the ASX, if everything goes ahead.

Altium share price snapshot

Altium shares have gone up 90% in the past five years, giving shareholders plenty of reward.

Motley Fool contributor Tristan Harrison has positions in Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Altium. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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