The APM Human Services International Ltd (ASX: APM) share price has jumped 10.4% to $1.38 today after the All Ordinaries (ASX: XAO) stock accepted a $1.3 billion takeover bid.
Today's acquisition news and subsequent share price boost follow a challenging period for the employment and human services business as low unemployment rates chipped into client flows.
Let's take a look at the news.
Takeover bid accepted
In today's announcement, APM advised it has entered into a scheme implementation deed with Ancora BidCo Pty Ltd, an entity controlled by US-based private equity outfit Madison Dearborn Partners (MDP).
The accepted agreement means MDP will buy all remaining APM shares it doesn't already own for $1.45 cash per share, valuing APM at $1.3 billion.
While a previous bid from CVC Asia Pacific in February of $1.60 per share was higher than today's accepted offer, APM rejected it for being too low at the time, and CVC walked away.
In the latest deal, eligible APM shareholders will have the option to receive either 90% or 100% of their takeover consideration in unlisted shares in the acquisition entity.
If the scheme is implemented, executive chair Megan Wynne and APM CEO Michael Anghie intend to receive 100% unlisted shares in the acquisition entity for their APM shares.
Why is APM accepting this offer?
The APM independent board committee (IBC) unanimously recommends that shareholders vote in favour of the takeover in the absence of a superior proposal. This recommendation is subject to an independent expert concluding and continuing to conclude that the scheme is in the best interests of APM shareholders.
The IBC is positive on the offer, saying it provided a "significant premium" to the undisturbed APM share price and delivered certainty of value. It noted the APM share price may trade at a significantly lower price in the absence of the takeover offer, and there were no alternative viable proposals.
The IBC cited the "uncertainty of the near-term outlook" as a key reason to accept the offer. It added that the ASX All Ords stock "continues to operate in an environment of extended low levels of unemployment and client flows, with increased support provided to achieve sustainable employment."
While APM thinks these factors will "normalise over time" and that its other businesses can continue to grow, it is uncertain when this will occur.
The IBC also noted this offer allowed for shareholders to remain invested in APM, if they chose to do so.
Trading update
Also in a short trading update today, APM revealed it had experienced low client flows in Australia and the United Kingdom during April and May this year.
The company expects its FY24 profit to be "around the bottom" of its profit guidance range. FY24 underlying net profit after tax (NPATA) had been guided at between $95 million and $105 million, and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was previously guided to between $280 million and $290 million.
Additionally, APM expects the activity levels in the second half of FY24 to be "likely to continue into FY25." It also noted that the completion of the refinancing of certain existing bank facilities was expected to result in a higher interest expense in FY25 compared to FY24.
What next?
APM will send shareholders a scheme booklet in July 2024, which will include information about the offer, the reasons for the IBC recommendation, an independent expert's report, and details of the scheme meeting.
A meeting will likely be held in September 2024 for shareholders to vote on the proposal. If accepted, implementation is expected to occur in October 2024.
APM share price snapshot
The APM share price has lifted more than 9% since the start of 2024, but it's been a bumpy ride for shareholders this year, as we can see in the graph below.
