Major APM backer Madison Dearborn’s low-ball $1.40-a-share buyout offer ‘disappointing’

APM’s major private equity backer Madison Dearborn Capital Partners has valued the company it helped usher onto the Australian Securities Exchange less than three years ago at just a fraction of its listing price.

The embattled employment and disability services provider emerged from a more than week-long trading halt on Monday to reveal that Madison Dearborn had bid “a disappointing” $1.40 a share to sweep up the 70 per cent of the company it doesn’t already own and take it back into private hands.

That’s a far cry from the $3.55-a-share price APM listed at in November 2021. It’s also 60¢ short of the $2-a-share fellow private equity giant CVC had offered for a buy-out last month before walking away from the deal following four weeks of exclusive due diligence.

Madison Dearborn’s low-ball offer was just one half of a double whammy for a company desperate to put a horror six months behind it.

APM also announced a company-wide detailed review as it warned investors it continued to suffer operational pressures because of persistently low levels of unemployment.

Madison Dearborn’s near $1.3 billion offer was lobbed late on Friday and APM said it had spent the weekend assessing the deal. It holds about 30 per cent of APM’s stock after snapping up the stake from Quadrant Private Equity in 2020.

Along with founder Megan Wynne and her Perth IVF specialist husband Bruce Bellinge, the trio already control about 64 per cent of APM’s register.

The company on Friday extended suspension of trade in its shares to buy more time to do a deal with the Chicago-based private equity group, which will require the backing of the full board. Madison Dearborn already has three directors around the table.

The offer also includes a rollover election for APM shareholders to receive all or part of the consideration in unlisted shares in the acquisition entity. It would also require certain shareholders — including Ms Wynne and founding related parties, managing director Michael Anghie and key management — to agree to receive all of their consideration in scrip.

The same independent board committee that ran the ruler over the $1.8b deal from CVC has also been charged with working with Madison Dearborn. It is chaired by Nev Power and includes former WA treasurer Ben Wyatt.

Mr Power said the committee was focused “on achieving an outcome that is fair and reasonable and in the best interests of all shareholders”.

“The IBC notes that the offered price per share under the MDP proposal is disappointing,” he said.

“The MDP proposal does not require exclusivity and allows the company to engage with other potential acquirers.

“The IBC together with its advisors intend to engage with MDP and any other interested parties to determine whether an appropriate proposal can be put to shareholders having regard to other alternatives including remaining listed and pursuing the growth opportunities available to the company.”

APM said the company-wide review would focus on cost-saving and efficiency measures that would start this quarter and aim to save $25 million.

It also suggested a typically strong performance in the fourth quarter was unlikely to occur this year and it had again downgraded its underlying earnings for the full year to between $280m and $290m — down from $365m a year earlier. Net profit is expected to come in at between $95m and $105m — well down on the previous year’s $178m.

Making her first official comments since APM became the target of opportunistic suitors last month, Ms Wynne delivered an upbeat outlook.

“In the current challenging operating environment APM continues to deliver outstanding client outcomes and contract performance,” she said.

“We remain positive on our outlook for FY25, which is underpinned by recent contract awards.

“There are further significant opportunities for future growth supporting underserved populations within the employment services, health, disability and aged care sectors.”

Ms Wynne and Madison Dearborn were the big winners from APM’s disastrous $3.3 billion float in late 2021.

Ms Wynne and Mr Anghie received $30.4m and $40.9m, respectively, from the selldown.

APM spared itself a stock rout by suspending its shares from trade earlier this month when it revealed several suitors had expressed an interest in a buy-out.

That came just days after APM locked its shares in a trading halt to drop the bombshell news that CVC had binned its $1.8b proposal after spending a month poring over the company’s books.

That takeover bid had helped to rescue APM’s share price from freefall after a stunning sell-off by investors drove the stock to just 68¢ in late January. It will resume trade on Monday at $1.63 a share.

APM’s market woes started in November when it slashed its profit guidance. The sell-off gathered pace in January after it delivered a worse-than-expected first-half trading update that saw a 35 per cent fall in underlying net profit to $55m — 33 per cent short of consensus expectations.

Investors’ nerves were also exposed late last year amid a review into the National Disability Insurance Scheme that outlined a raft of proposed changes to rein in costs and tighten up services of the $40b payment system.

It reported statutory net earnings for the six months to December 31 had plunged 81.5 per cent to $7.2m from $38.9m for the same period in 2022, despite a 31 per cent jump in revenue to $1.1b.

The fall was attributed to low unemployment that had reduced its government-funded job placements in Australia and Britain and made it harder to find staff for its allied health business.