Siemens' $10.6 billion Altair deal seen boosting industrial software offering

By John Revill

(Reuters) - Siemens announced a $10.6 billion deal to buy U.S. engineering software firm Altair Engineering overnight, cheering analysts who see it boosting the company’s presence in the fast-growing industrial software market.

Still, there was some concerns about the high price Siemens paid for Michigan-based Altair. The offer price of $113 per share represents a premium of about 18.7% to Altair’s close on Oct. 21, a day before Reuters first reported the company was exploring a sale.

The deal is Siemens’s biggest acquisition since Siemens Healthineers bought medical device maker Varian Medical Systems for $16.4 billion in 2020.

Analysts at Alpha Wertpapierhandel said the deal, while not cheap, would strengthen Siemens’ struggling digital industries division.

"Altair adds AI-powered design and simulation," Alpha said. "All in all, longer term, this seems to be a good deal for Siemens."

Jefferies analyst Simon Toennessen said the acquisition gave Siemens more expertise around artificial intelligence and high performance computers.

It would also make the group a more credible rival to chip-design company Synopsys, which agreed to buy design software firm Ansys earlier this year, as well as Cadence Design Systems

Siemens shares were down 0.8% at 0827 GMT, against a 0.4% decline in the wider index. The share price reaction might be due to the cost of the deal, one trader said. 

Altair, whose simulation software helps predict how products would work in the real world, fits Siemens’s strategy of using its hardware and software to combine the real and digital worlds.

The German maker of trains and factory equipment has been trying to expand beyond its traditional industrial customers by boosting its digital offering to improve the performance of its production lines, trains and buildings.

The transaction is anticipated to add to Siemens’ earnings per share in about two years from the deal’s closing, which is expected in the second half of 2025.

It will also increase Siemens’ digital business revenue by  about 8%, adding approximately 600 million euros ($651.4 million) to the company’s digital business revenue in fiscal 2023.

The transaction would have a revenue impact of about $500 million per year in the mid-term and more than $1 billion per year in the long term, Siemens said.

Siemens competes with Rockwell Automation, Emerson Electric and ABB in the industrial software market which is currently worth an estimated $21.5 billion annually and is forecast to grow by 16.7% per year.

Separately on Wednesday, Altair reported a 13% third-quarter rise in revenue to $151.5 million.

Engineering software companies have become attractive acquisition targets as investors bet on companies that could benefit from the boom in artificial intelligence.

In January, Synopsys agreed to buy design software firm Ansys in a $35 billion cash-and-stock deal. 

($1 = 0.9211 euros)

(Reporting by John Revill in Zurich, Emma-Victoria Farr in Frankfurt; Additional reporting by Arsheeya Bajwa in Bengaluru; Editing by Maju Samuel and Jan Harvey)