Appen ‘moving on’ after failed $1.2bn takeover bid

The company’s share price sank by more than 20 pc but chairman Richard Freudenstein says there’s strong cause for optimism.

CEO Mark Brayan of Appen. Picture: Jane Dempster/The Australian.

Shares in AI specialist Appen lost more than 20 per cent of their value on Friday as chief executive Mark Brayan and chair Richard Freudenstein faced angry shareholders at the company‘s annual meeting – one day after Canadian IT firm Telus walked away from a $1.2bn takeover bid.

Telus on Thursday tabled a $9.50 per share offer for Appen, a deal that was weeks in the making, but the company on the same day walked away from the bid, nine hours after it became public.

Mr Freudenstein on Friday the company remained in the dark as to why Telus walked away.

“We received this non-binding offer from Telus and we were very conscious they were a competitor, but we also wanted to make sure we were exploring options for shareholders, so through our advisers we tried to negotiate a confidentiality agreement and standstill agreement, to see what we could do to improve their offer,” Mr Freudenstein said in an interview. “And then lunchtime Thursday, we received a two line email withdrawing the offer. We‘ve tried reached out to try and get some more clarity, I don’t know if we’ll get any further response. I think the best thing is just to move on.”

Mr Brayan said the saga demonstrated that his company “is a valuable commodity”.

The Sydney-based company creates human-curated datasets to train artificial intelligence programs and its customers are thought to include tech giants including Amazon.

“We’ve got great people, great products and fantastic customers, and that’s why people do things like this, because there’s a lot of value in a business like ours,” he said. “It underscores the importance of our customers and looking after them, because my reflection when this happened is that I want to make sure that whatever happens with this outcome, I‘m doing the right thing by my customers and the staff.

“So in some ways, it refocuses you on what’s important.”

Telus‘ offer was a significant premium to Appen’s pre-takeover price of $6.40, and valued the company at around $1.2bn. Shareholders on Friday let their feelings known to the company’s management at its annual general meeting in Sydney.

Appen shares closed down 20.9 per cent to $6.54 on Friday.

“When are you the management team including directors going to resign … you have destroyed shareholders’ investment,” one shareholder asked Mr Freudenstein.

Shares in Appen have dramatically fallen from a pandemic high of close to $40, amid what‘s been a broader tech bloodbath.

“Thank you for that question. I think hopefully you’ve heard from Mark’s presentation and my presentation that the company has gone through a stage of renewal,” Mr Freudenstein said.

“There’s been board renewal with two new directors appointed including myself, the other one being Stuart. There’s been significant renewal of the executive team. And I believe we have a very, very strong executive team who are really ready to really drive this company forward over the next few years.

Richard Freudenstein speaking at Australia Israel Chamber of Commerce at Westin in Sydney.

“We believe we have a good strategy in place we have a good team to deliver it. And we look forward to working, working with our shareholders as we continue to do that.”

Over the past year Appen has been hit by privacy changes made by Apple to its iPhones – changes that have also affected Facebook, which earlier this year reported a $US10bn ($14bn) impact on advertising revenues due to the changes.

Mr Freudenstein told the Friday meeting that he “understands that shareholders are very unhappy with where the share price is today.” “The board and management acknowledge that some areas of our business have not delivered to their full potential. We also acknowledge the concern of some investors about not providing near-term guidance as we are focused on our long-term strategy,” he said.

A Telus spokeswoman said the company had “a very healthy and robust M&A pipeline, and at any given point in time, our company is in various stages of due diligence with potential targets”.

We are a selective acquirer, and as such we engage in a robust evaluation of all target companies. In this particular case, we did look at Appen, and after an initial evaluation made the decision to walk away from our non-binding offer,” she said.