Telus why: $1.2 billion takeover of Appen revoked “without explanation” after just eight hours

It took just eight hours for Canadian telco giant Telus to revoke its $1.2 billion takeover proposal of Sydney-headquartered Appen (ASX: APX), which has been left in the dark as to why the deal was dumped.

In an update on the transaction posted yesterday afternoon, Appen explained how the $9.50 per share offer was subject to a number of conditions, including that the two enter into a confidentiality and standstill agreement, also known as a non-disclosure agreement (NDA).

The artificial intelligence firm said it negotiated the NDA to an agreed form with Telus, with an expectation that it would be executed by the Canadian company “imminently”.

However, Appen explained that following media reports leaking details of the proposed transaction it was forced to disclose the now-dead deal to the market.

“This afternoon, Telus informed us that they were revoking their Indicative Proposal,” said Appen.

“No reasons were given.”

Coincidentally, Appen is holding its annual general meeting this morning where the company's chair Richard Freudenstein will explain events in greater detail.

“While there was some uncertainty about the Telus offer, in the interests of shareholders, we sought to engage with Telus to better understand their conditions and determine whether an improved offer could be made,” Freudenstein wrote in speech notes that were released to the market ahead of the AGM - his first since being appointed to the role in October last year.

“Naturally, before providing non-public information to a competitor, we negotiated a confidentiality and standstill agreement, which was in agreed form for a number of days, but which Telus has not signed.

He is expected to tell shareholders that because the proposal leaked just prior to the AGM, there was a loss of confidentiality and the company was required to disclose the proposal.

“Yesterday afternoon Telus sent us a letter that indicated they were revoking their offer, without providing any rationale or explanation. We sought to reach out to Telus through their advisers but have not been able to establish contact," he wrote. 

“Importantly, as a confidentiality agreement was not executed, at no point did we provide any non-public information to Telus.”

Under the ditched deal, Telus would have acquired 100 per cent of Appen at a price roughly 33 per cent higher per share than Wednesday’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.