APM shares collapse 30% as 'disappointing' bid lands in its lap

It hasn't been a good start to the week for owners of this stock.

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APM Human Services International Ltd (ASX: APM) shares have returned from suspension and crashed deep into the red.

In morning trade, the human services company's shares are down 30% to $1.14.

Though, it is worth noting that its shares still remain up 40% over the last two months even after today's decline.

Why are APM shares collapsing?

Investors have been selling the company's shares this morning after the collapse of one takeover offer and news of another that was well short of expectations.

As a reminder, in February APM revealed that it received a revised conditional, indicative, non-binding offer of $2.00 cash per share from CVC Asia Pacific.

This was up from an initial offer of $1.60 cash per share and was enough for the company to grant CVC Asia Pacific with due diligence access.

However, as it recently revealed, following the conclusion of its due diligence, CVC Asia Pacific advised that it was unable to proceed to finalise a transaction on terms consistent with the aforementioned non-binding offer.

But the takeover news wasn't over. Although CVC Asia Pacific pulled the plug on a deal, Madison Dearborn Partners (MDP), which currently holds an interest of approximately 29% in APM and has three directors on the APM Board, indicated its intention to put forward an indicative non-binding proposal to acquire the company.

This brings us to today. the company's shares are in freefall today after MDP put forward an offer to acquire all APM shares which it does not already hold for $1.40 cash per share by way of a scheme of arrangement.

This is 30% lower than CVC Asia Pacific's proposal and 14% below where APM shares were trading prior to their halt and suspension.

What now?

APM advised that its Independent Board Committee (IBC) will be responsible for engaging with MDP in relation to its proposal and other potentially interested parties.

Though, the proposal will be lucky to be given the thumbs up from the IBC after being described as "disappointing" by its lead independent director, Nev Power. He said:

The IBC is focused on achieving an outcome that is fair and reasonable and in the best interests of all shareholders. The IBC notes that the offered price per share under the MDP Proposal is disappointing.

The MDP Proposal does not require exclusivity and allows the Company to engage with other potential acquirers. The IBC together with its Advisors intend to engage with MDP and any other interested parties to determine whether an appropriate proposal can be put to shareholders having regard to other alternatives including remaining listed and pursuing the growth opportunities available to the Company.

Trading update

Based on early management accounts for the third quarter, and assuming that historical seasonal trends do not occur in FY 2024, the company anticipates FY 2024 underlying EBITDA and underlying NPATA to be in the range of $280 million to $290 million and $95 million and $105 million, respectively. This is based on no change in the operating environment for the balance of the year.

Positively, APM notes that it expects significant incremental earnings growth in FY 2025 through announced contract awards and corporate initiatives.

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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended APM Human Services International. 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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