Affinity Equity Partners emerges as mystery APM suitor ahead of $1.3bn Madison Dearborn privatisation

Perth-based APM is one of the nation’s largest human services providers, delivering programs for the government’s National Disability Services and National Disability Insurance Scheme. Picture: iStock

The identity of another suitor for APM has emerged, as the human services provider confirmed to the market on Monday that it has agreed for 29 per cent shareholder Madison Dearborn Partners to privatise the business for a price that values it at $1.3bn.

Now, DataRoom understands that Affinity Equity Partners has been taking a look at APM in the lead up to the deal with Madison Dearborn Partners.

In other developments, this column can reveal APM’s suitor, CVC, made efforts to embark on a joint bid with Madison Dearborn, but the attempts never gained any traction.

The privatisation comes only four years after US-based Madison Dearborn, which bought the company from Quadrant Private Equity for $1.5bn in 2020, listed it the following year as a business with an eye watering valuation of $3.25bn, gaining initial public offering popularity among ethical investors in a low interest rate environment.

However, APM’s share price has since fallen considerably and on Monday it warned of further deteriorating earnings in the coming months.

CVC had earlier bid $1.60 a share then gained due diligence access with a $2 a share offer but walked away after taking a look at the books.

Bain Capital showed some lose interest, but it was Affinity that had the most chance of becoming a serious contender to rival Madison Dearborn after CVC walked away, although once again, its interest never developed into a buyout proposal.

The move by Madison Dearborn to slightly sweeten the deal was first revealed by DataRoom on Sunday, as investors were betting an increase of between 1c and 10c a share could be in the wings to its initial $1.40 a share offer.

Madison Dearborn, advised by Goldman Sachs, will offer $1.45 a share for APM in a scheme of arrangement-style agreement, where shareholders vote on the sale.

An unknown is whether executive chairman Megan Wynne, who owns 34 per cent, of the stock will vote, but like chief executive Michael Anghie, she plans to roll her shares into the transaction set to complete this year.

However, regardless, it appears that a privatisation of APM is a given, with institutional investors holding about 19 per cent of the stock believed to be supportive of the take private move.

Madison Dearborn is excluded from voting.

The offer, where shareholders can elect to receive cash or shares, is a 74.7 per cent premium to the closing price of APM’s share price on February 16, the day before private equity firm CVC bid for the company (it later withdrew after carrying out due diligence).

APM said the board considered the significant premium, certainty of value, future trading price, near-term outlook uncertainty, opportunity to remain reinvested and absence of alternative proposals.

The announcement came as APM, advised by UBS, said that over the past two months, the company had continued to experience low client flows in its employment services businesses in Australia and the UK and now expects its earnings to be around the bottom of its earlier guidance issued on April 8, where it then said that its earnings would be somewhere between 5 per cent and 10 per cent less than anticipated.

APM said it expected that the activity levels experienced in the second half of 2024 were likely to continue into the 2025 financial year.

Ahead of a planned debt refinancing, interest payments were set to be higher in the next year.

Madison Dearborn has been carrying out due diligence on the target since April 8 when it put forward a proposal to privatise the business at $1.40 a share, an offer APM said at the time was “disappointing” but one it did not reject.

APM is wrestling with the tight allied health labour market, higher wages and rent and abnormally prolonged low levels of unemployment.

The Perth-based company is one of the nation’s largest human services providers, delivering programs for the government’s National Disability Services and National Disability Insurance Scheme.