Appen board mulls $154m takeover bid from US tech player

The board is considering its second takeover offer in just two years, after recently losing a lucrative contact with Google.

Appen's new CEO Ryan Kolln.

US tech firm Innodata has pounced on troubled Australian rival Appen, lobbing a stock-for-stock takeover bid worth $154m.

The bid – disclosed in a share price query from the ASX – comes at a tumultuous time for Appen investors. Just three years ago, Appen was touted as one of Australia’s next big tech companies, with its shares surging above $35 before it crashed to less than 30c a piece.

The company has lost two chief executives within 14 months, with former boss Armughan Ahmad announcing his abrupt departure last month after the company lost a $US82.8m contract with Google.

Nasdaq-listed Innodata has offered Appen shareholders 70c worth of Innodata shares for each Appen share, valuing the deal at $153.5m. This is about 10 per cent of the $1.2bn price Canadian IT firm Telus offered Appen in mid 2022 before it abandoned takeover talks.

Appen – which cleans up large data sets and sells them to AI-focused companies – says they’re considering the Innodata merger, which last traded at $US5.98 ($9.05), giving it a market value of $US172.1m.

Appen said Innodata’s offer represented a premium of more than 100 per cent when the offer was made. But in the past month, Appen shares have more than tripled, raising eyebrows and questions from the ASX.

Appen shares hit a five-month high on Tuesday, rising 40 per cent to $1.17, before going into a trading halt. The rise was 54 per cent over Monday and Tuesday.

The company has since disclosed it was “seeking to understand the potential value to Appen shareholders” from the deal and that it had agreed to an exchange of non-public information. Barrenjoey and Allens have been brought in to assess the transaction.

“The board notes that there is no certainty that the Indicative Proposal will result in a binding proposal for Appen, what the terms of such a proposal would be, or whether there will be a recommendation by the Board,” Appen said in an ASX statement.

Appen shares dropped when trading resumed on Wednesday, and were down 13 per cent to 93.5c by late morning.

Appen’s start to the year has been somewhat of a rollercoaster, as the company lost one of its most lucrative contracts with Google.

That contract which had delivered $US82.8m ($125m) in revenue was abruptly cut in January, with the remainder of it to be served until March.

The company said Google’s move arrived as a complete surprise, with the company having “no prior knowledge” of the contract termination.

It is a move that has further eroded investor confidence amid a series of torturous years and developments that has blasted billions of dollars from the company’s market value.

The unions called it a massive wake-up call for the power of AI, but others had questioned whether Appen was losing relevance.

Just two weeks later, on February 6, Mr Ahmad suddenly departed the company.

Mr Ahmad was the second chief executive to depart the company over a 14-month period, and was replaced by Appen chief operating officer Ryan Kolln.

One week after Mr Ahmad’s sudden exit, the company announced it would be making $US13.5m ($20.7m) worth of cost cuts as it sought to plug the $US82.8m hole left on its balance sheet from Google’s shock contract termination.

The major cuts would cost the company as much as $US2.5m and includes the closure of two of its North American offices.