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When asked to choose between holding shares in competitor and suitor IPH (ASX: IPH) and the major cash component in a takeover offer from Adamantem Capital, the board of QANTM Intellectual Property (ASX: QIP) is all about the money.
QANTM, which owns patent law firms Davies Collison Cave (DCC) and FPA Patent Attorneys as well as AI-powered trademark legal tech company Sortify.tm, has been the target of a bidding war since February.
The battle for QANTM started with UK-based intellectual property group Rouse International before Adamantem came into the equation the following month, and earlier this week IPH threw its hat in the ring in a repeat of a 2018 tilt.
At the time IPH's predominantly scrip-based offer was worth $265 million, representing an $11 million premium to anything else that was on the table at the time. But as is the way with takeover offers involving stock, fluctuations in the buyer's share price can have significant implications for value.
With its own shares down over the course of the week, IPH's offer for QANTM has dropped from $1.90 per share to $1.81, or $254.6 million in total. This is also against a backdrop of IPH's share price dropping by more than a quarter over the past 12 months, while QANTM's share price has gone in the opposite direction - doubling in fact.
Adamantem was already engaged in exclusive due diligence with QANTM when IPH made the bid, and the private equity firm - with investments including the likes of Betty's Burgers and Boost Juice owner Retail Zoo, and sustainable packaging outfit PAC Trading - has taken full advantage of its rival's downfall.
Today QANTM announced it had entered a binding scheme implementation deed (SID) with an entity owned by Adamantem to buy all shares for $1.817 each, valuing the business just higher than IPH's proposal.
QANTM shareholders will have the option to choose between receiving 100 per cent cash, or a 50-50 split between cash and unlisted shares in Adamantem.
The deal is already supported by shareholders representing 19 per cent of QANTM shares on issue from principals working in QANTM’s businesses. Based on the relative certainty of the scheme, the board unanimously recommends that QANTM Shareholders vote in favour.
The board highlights significant uncertainty as to whether the IPH indicative proposal was reasonably likely to be completed given its conditions of due diligence to IPH’s satisfaction and regulatory approvals, including from the Australian Competition and Consumer Commission (ACCC) and New Zealand Commerce Commission (NZCC).
"The value of the IPH indicative proposal, being primarily scrip based, was also not certain or fixed and will change in accordance with changes in the market price of IPH shares (in this respect, it is noted that the IPH share price has fallen since announcement of the IPH indicative proposal)," the company stated.
"Even though at the time that the IPH indicative proposal was announced, its implied value was slightly more than the certain value of the cash consideration, the implied value is not fixed and by the end of that day, had decreased.
"The QANTM board, in taking into account all relevant factors, considered that it was in the best interests of QANTM and its shareholders to secure a binding agreement to proceed with the scheme.
"The QANTM board remains able to consider and progress superior proposals that any bidder wishes to table, in accordance with, and subject to, the exclusivity provisions set out in the SID."
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