The Appen Ltd (ASX: APX) share price has come flying out of the gates on Thursday morning.
In early trade, the artificial intelligence services company's shares were up as much as 35% to $8.64.
The Appen share price has pulled back a touch since then but remains up 29% to $8.29.
Why is the Appen share price rocketing higher?
Investors have been scrambling to get hold of Appen's shares today after it revealed that it has received a takeover approach.
According to the release, the company has received an unsolicited, conditional, and non-binding indicative proposal from TELUS International to acquire it for $9.50 per share. This values Appen at approximately $1.2 billion.
Based on the Appen share price at the close of play on Wednesday, this offer represents a 46% premium for shareholders. Though, it is still well short of its 52-week high of $14.67 and two-year high of ~$40.00.
Will a deal be made?
Appen advised that it is looking over the offer but doesn't sound overly keen to accept it. This may explain why the Appen share price is still trading at a sizeable 13% discount to the offer price.
It commented:
The Board is in discussions with Telus to seek an improvement in the terms of the Indicative Proposal. To facilitate this, the Board has offered to provide, on a non-exclusive basis, limited business and financial information, subject to Telus agreeing to enter into a mutually acceptable confidentiality and standstill agreement, which it has yet to execute. At this point in time, no material non-public information has been provided to Telus.
Trading update
It may prove quite fortuitous that the company received a takeover approach, because without it the Appen share price may have come under pressure from the release of a particularly weak trading update.
That update reveals that Appen's year-to-date revenue was lower than it was at this time last year at the end of April.
In light of this, the company expects its first half earnings before interest, tax, depreciation and amortisation (EBITDA) to be "materially lower than the prior corresponding period."
And while management expects its second-half performance to be stronger, its guidance has been wide of the mark in recent years so this is far from guaranteed.
