Oct 30 (Reuters) -

Siemens will buy Altair Engineering ( ALTR ) for

$10.6 billion, the American engineering software firm said on

Wednesday, as it seeks to strengthen its presence in the

fast-growing industrial software market.

The offer price of $113 per share represents a premium of

about 18.7% to Altair's closing price on Oct. 21, a day before

Reuters first reported that the company was exploring a sale.

The deal for Michigan-based Altair is German company

Siemens's biggest acquisition since Siemens Healthineers

bought medical device maker Varian Medical Systems for

$16.4 million in 2020.

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.

Siemens competes with Rockwell Automation ( ROK ),

Emerson Electric ( EMR ) and ABB in the industrial

software market which is currently worth an estimated $21.5

billion annually.

The market is estimated to increase to $46.6 billion by

2029 - an annual growth rate of 16.7% - according to Markets and

Markets, a research company, as artificial intelligence and data

analytics drive demand for software to manage complex

interconnected systems.

Industrial automation is one of the core businesses

within Siemens. CEO Roland Busch has said he wants to expand the

software side of the business, although he has previously said

he preferred small deals.

CFO Ralf Thomas said in an interview last month that Siemens

wanted to gain a stronger foothold in factory automation in the

United States to offset weakness in China, adding that Siemens

was interested in software acquisitions.