Altium (ASX: ALU) Downgraded To Hold On $68.50 Takeover Offer

This morning, ASX software stock Altium (ASX: ALU) announced that the board of directors unanimously recommends shareholders accept a takeover offer at a price of $68.50 from Renesas Electronics. Once the stock starts trading again, it is likely to rise to just below that price.

This is a pleasing result in the sense that it is almost 100% higher than the price we recommended Supporter Buy Altium back in July 2023. However, it is a disappointing in the sense that Altium is one of the core, non-speculative, long term holdings in my portfolio, which was intended to be a multi-year multi-bagger, not a short term trade.

The takeover is subject to certain conditions, as shown below.

Interestingly, Altium still has the right to declare an interim dividend, and this will not be deducted from the final consideration. Therefore, if (for example) Altium declares a 25c interim dividend, then hypothetically shareholders could receive closer to $68.75 for just holding on to their shares.

Once we see where Altium shares are trading post-offer, and once we have more information about the timetable for the implementation of the takeover, I’ll make a decision about whether I prefer to hold on to my shares into the takeover, or sell the shares prior to that.

However, investors may wish to consider the tax implications of the timing of their disposal of Altium shares. Unfortunately, I only recommended Altium stock to A Rich Life Reporters in July 2023, when the share price was around $37. That means if the takeover occurs prior to July 2024, I won’t be able to take advantage of the capital gains discount available for investments held more than 12 months.

Therefore, until we have more information, Altium is downgraded from a Buy recommendation to a Hold recommendation.

Please note that this advice is general advice only. I have not considered your investment objectives and this is not personal advice. This advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Equity Story Pty Ltd (ABN 94 127 714 998) (AFSL 343937). The author owns shares in ALU at the time of publication.

General advice warning: This information does not constitute a personal recommendation, or take into account the particular investment objectives, financial situation or needs of any individual. Any advice contained on this website is general advice only and has been prepared without considering your objectives, financial situation or needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision (including a decision about whether to acquire or continue to hold) about a financial product.

Past performance is not a reliable indicator of future performance.

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