10-K: Altair Engineering to be Acquired by Siemens Industry for $10.6 Billion

Altair Engineering Inc. will be acquired by Siemens Industry in a deal valued at $10.6 billion, pending regulatory approvals and customary closing conditions.

Summary

• Altair Engineering Inc. has entered into a merger agreement with Siemens Industry, with Siemens Industry acquiring Altair for $113.00 per share in cash, valuing the deal at $10.6 billion.
• The merger is subject to customary closing conditions, including regulatory approvals, and is expected to close in the first half of 2025.
• Altair's stockholders approved the merger agreement on January 22, 2025.
• Altair's 2024 revenue increased by 8.7% to $665.8 million, compared to $612.7 million in 2023.
• Software revenue increased by 11% to $611.9 million in 2024.
• The company's net income for 2024 was $14.2 million, a significant improvement from the net loss of $8.9 million in 2023.
• Adjusted EBITDA for 2024 was $149.9 million, compared to $129.1 million in 2023.
• The company acquired KSK Analytics, Metrics Design Automation Inc., Research in Flight, and the assets of Cambridge Semantics in 2024.
• Altair's recurring software license rate was 93% for 2024.
• The company had $561.9 million in cash and cash equivalents as of December 31, 2024.

Sentiment

Score: 8

Explanation: The document presents a positive outlook due to the pending acquisition at a premium and improved financial performance, but also highlights potential risks associated with the merger and market competition.

Positives

• The acquisition by Siemens Industry provides a significant return to Altair's stockholders.
• Software revenue experienced substantial growth, indicating strong demand for Altair's products.
• The company achieved net profitability in 2024, reversing the losses from the previous year.
• Adjusted EBITDA increased, reflecting improved operational efficiency.
• High recurring software license rate demonstrates customer loyalty and predictable revenue streams.
• Strategic acquisitions expand Altair's portfolio and capabilities.

Negatives

• Engineering services and other revenue decreased by 14% in 2024, indicating potential weakness in that segment.
• General and administrative expenses increased significantly due to costs associated with the pending merger.
• The company has a significant valuation allowance against deferred tax assets in the United States.

Risks

• The merger with Siemens Industry may be delayed or not occur at all.
• Efforts to complete the merger could disrupt relationships with third parties and employees.
• The company is subject to restrictions on its business activities while the merger agreement is in effect.
• Litigation against the company and its directors and officers relating to the merger could result in substantial costs.
• The company faces significant competition in the simulation, data analytics, and high-performance computing software market.
• Fluctuations in foreign currency exchange rates could negatively impact reported revenue and operating results.
• Security breaches, computer malware, computer hacking, and other security incidents could harm the business.

Future Outlook

The company anticipates that the merger with Siemens Industry may close in the first half of 2025.

Industry Context

The acquisition reflects a trend of consolidation in the simulation, data analytics, and high-performance computing software market, with larger companies seeking to expand their capabilities and market share through acquisitions.

Comparison to Industry Standards

• Dassault Systèmes, Ansys, and Hexagon's MSC Software are key competitors in the simulation software market.
• SAS Institute and Alteryx are major players in the data analytics space.
• The $10.6 billion valuation reflects a significant multiple of Altair's revenue and EBITDA, suggesting a premium valuation based on its growth prospects and strategic value to Siemens Industry.

Legal Proceedings

• Stockholders have filed lawsuits against Altair and its directors and officers in connection with the merger, which could result in substantial costs and delays.

Stakeholder Impact

• Shareholders will receive $113.00 per share in cash upon completion of the merger.
• Employees may experience uncertainty regarding their future with the company as a result of the merger.
• Customers may be affected by changes in product offerings and support as a result of the merger.
• Suppliers and other business partners may be impacted by changes in business relationships as a result of the merger.

Next Steps

• Obtain required regulatory approvals for the merger.
• Satisfy customary closing conditions for the merger.
• Complete the merger with Siemens Industry in the first half of 2025.

Key Dates