APM Price valuation
News reports indicate that Madison Dearborn is prepared to acquire APM for 1.40 per share. Is there a reason why the share isnt trading closer to this price point? Regards Suresh
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Answer
Hi Suresh,
We wrote about APM in this week’s Portfolio Positioning Report here. With a stock under takeover, the share price will show the market’s expectation around the deal proceeding, with the stock trading at a ~15% discount it suggests there are a number of risks involved in seeing this deal through.
Madison Dearborn already own’s 29% of APM so they are well placed in terms of having a foothold of shares on issue. The bid is non-binding and non-exclusive, meaning Madison Dearborn can walk without any repercussion and APM is able to seek out other potentially interested parties in working on a transaction. This suggests the bid is reluctant at best.
Madison Dearborn’s bid was also announced after CVC Partners walked away from their own takeover bid, while APM also downgraded earnings expectations at that time.
