Appen share price on watch amid takeover offer collapse

Appen shares could be in for a rough ride on Friday…

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Key points

  • Appen received a takeover approach from Telus International on Thursday at a 48% premium of $9.50 per share
  • However, just hours later, Telus withdrew its offer without comment
  • This may have been driven by the offer being leaked to the press

The Appen Ltd (ASX: APX) share price will be one to watch this morning.

The artificial intelligence data services company’s shares are due to return from a trading halt and are likely to tumble deep into the red.

Why is the Appen share price on watch?

On Thursday, the Appen share price rocketed 30% higher after Canada’s Telus International made a $9.50 per share takeover proposal. This was a 48% premium to its last close price and valued Appen at approximately $1.2 billion.

However, within a few hours the Appen share price was hurried into a trading halt pending a further update on the proposal.

Unfortunately, that update reveals that Telus International has withdrawn its takeover proposal no sooner than it was tabled.

According to the release, following the receipt of the proposal, Appen engaged with Telus and sought to agree an appropriate confidentiality and standstill agreement (NDA), after which Appen was prepared to make available limited business and financial information.

And while the two parties negotiated the NDA and Appen was expecting it to be executed by Telus imminently, Telus instead informed Appen that it was revoking its proposal.

What happened?

Appen advised that no reasons were given by Telus for the withdrawal of the proposal, which means speculation is now rife.

One potential reason is that Telus wanted to keep the negotiations private. However, clearly someone involved leaked the deal to the AFR, which proudly states that it “broke the news that Appen was being pursued by a potential acquirer on Wednesday evening, before the proposal was confirmed by Appen on Thursday morning.”

Because of this leak, Appen was required to disclose the indicative proposal to the market. This may not have gone down well with Telus, causing it to pull the plug on talks.

Alternatively, Telus may have been put off my Appen’s very poor trading update which accompanied the takeover announcement. Appen revealed that it “expects 1H FY22 EBITDA to be materially lower than the prior corresponding period.”

Shareholders will no doubt be hoping that Telus comes back with another offer or rumoured interest from a private equity firm materialises. But that is far from guaranteed.

One thing for sure, though, is that the Appen share price looks set for a rough ride on Friday.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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