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Sydney-headquartered Appen (ASX: APX) has confirmed it has received a takeover offer from Canadian telco giant Telus for an indicative cash price of $9.50 per share, valuing the business at close to $1.2 billion.
The board of Appen is currently in discussions with Telus to seek an improvement to the terms of the indicative proposal, even though the proposed price is roughly 33 per cent higher per share than yesterday’s closing share price of $6.40.
Despite posting record revenue figures of $447.3 million during FY21, Appen hasn’t been able to arrest the steady decline of its share price since August 2020 when it fell from around $40 per share by 76 per cent over time.
The share price has been impacted as Appen looked to invest heavily in transforming its technology over the past few years to boost its product, engineering and machine learning abilities.
Founded in 1996 by linguist Dr Julie Vonwiller, globally-focused software company Appen collects and labels images, text, speech, audio, video and other data used to build and continuously improve artificial intelligence systems. With more than 1 million contractors across 170 countries, who speak 292 languages, Appen enables its clients to create large volumes of training data at speed.
Appen’s products and services provide its customers, including Adobe, Microsoft, Siemens, LinkedIn, Amazon, Boeing, Salesforce, Google and Bloomberg, with access to launch their own AI lifecycles.
In its negotiations with Telus, Appen will look to lean on its record of delivering long-term revenue growth, including 40 per cent annualised revenue growth from 2016 to 2021. It can also point to 422 per cent growth in China during FY21 and 21 per cent growth in new markets during the same period.
Appen will also look to leverage research conducted by Cognilytica, which estimates that the AI industry will grow by 32 per cent from 2021 to 2027.
The company is due to hold its annual general meeting (AGM) tomorrow, where it will report that year-to-date revenue plus orders in hand for delivery was approximately US$297 million ($418 million), up around 14 per cent compared to the same time last year.
However, its year-to-date revenue is lower than last year. Due to increased investment and spending, Appen expects its 1H22 EBITDA to be materially lower than the corresponding prior period.
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