APM Human Services: Board Rejects Opportunistic Offer Below Our Unchanged Fair Value Estimate

CVC Asia Pacific made a nonbinding offer to acquire no-moat APM for AUD 1.60 cash per share. While good news for APM shareholders, at a 93% premium to the last close, we think the offer price undervalues APM as a stand-alone business, representing a 33% discount to our unchanged AUD 2.40 fair value estimate. We agree with the APM board that has unanimously resolved not to pursue the proposal on the basis it undervalues APM. Despite this conclusion, we surmise the market has caught wind of APM’s long-term fundamental value and is possibly waiting for further developments.