APX (ASX) News: APX UPDATE 1-Australian IT firm Appen gets merger bid from US-based Innodata

And while Appen was keen to engage with Telus International, it wasn't overly keen on the price offered. Management explained that it was "in discussions with Telus to seek an improvement in the terms of the Indicative Proposal."

But rather than improving the offer, Telus walked away immediately from the table, taking its proposal with it.

Why did the takeover proposal collapse?

Unfortunately, Telus walked away from takeover talks without comment, which isn't very helpful.

However, it is worth noting that both companies were in the process of signing a confidentiality agreement prior to the takeover news leaking to the press. It is therefore possible that Telus wanted to keep talks private and has walked away now they have become public.

At its annual general meeting (AGM), management commented:

As you would be aware, details of their proposal leaked just prior to the AGM. As a result of the loss of confidentiality, we were required to disclose the proposal. Yesterday afternoon Telus sent us a letter that indicated they were revoking their offer, without providing any rationale or explanation. We sought to reach out to Telus through their advisers but have not been able to establish contact.

Alternatively, Telus may have been alarmed by Appen's poor performance so far in FY 2022.

As no material non-public information had been provided to Telus, it will have seen Appen's trading update at the same time we did yesterday. And it wasn't pretty.

That update revealed that Appen's year-to-date revenue at the end of April was lower than it was during the prior corresponding period. In light of this, the company expects its first half earnings before interest, tax, depreciation and amortisation () to be "materially lower than the prior corresponding period."

Telus may believe its offer was too generous given this abject performance and therefore withdrew it.