IPH threatens QANTM-Xenith merger with counterbid

Written on the 12 March 2019 by Matt Ogg

IPH threatens QANTM-Xenith merger with counterbid

Intellectual property company IPH (ASX: IPH) is upping the ante in its courtship of Xenith (ASX: XIP), putting in a higher takeover bid it claims will bring greater value than a merger in the works with QANTM Intellectual Property (ASX: QIP).

Xenith knocked back IPH's $1.80 per share offer in November, opting instead for an all-scrip deal that would create a $285 million IP powerhouse.

But IPH has proven a resilient and aggressive suitor in this non-consensual IP business love triangle, and almost a month ago it acquired a 19.9 per cent share of its fellow Sydney competitor Xenith for $1.85 a share.

But IPH has thrown another spanner in the works today, raising its cash-and-scrip offer to $1.97 per share - a bid that values Xenith at close to $175 million. 

This compares to its current market capitalisation of $142.39 million, the result of a share price that has already risen 11.5 per cent this morning to reach $1.79 per share.

"We believe our proposal to Xenith provides a great opportunity to bring together two high quality IP businesses and to draw on the strengths, skills and advantages of each member firm to realise opportunities for our people, our clients and our shareholders," says IPH managing director Dr Andrew Blattman.

Based on IPH's closing price yesterday, the company claims its offer represents a 23.3 per cent excess on the implied value of the QANTM merger consideration.

However, as the QANTM-Xenith merger is stock-for-stock its implied valuation has been fluctuating depending on IPH's moves.

At the close of business yesterday for example, that merger would have valued Xenith shares at $2.02 each. But since QANTM shares were dealt a blow by this morning's announcement, the merger values Xenith shares at $1.95 - more or less on par with the IPH offer. 

QANTM has slammed IPH claiming it has "understated" the implied QANTM-Xenith merger consideration, and believes a deal with IPH would imply higher execution and competition risk as well. 

"The IPH announcement states that the IPH Proposal represents a total value of $1.97 per Xenith share and asserts that this value is "23.3% in excess of the implied QANTM Merger consideration." But the 23.3% premium stated above is calculated using the closing price of QANTM shares on 26 November 2018, while the IPH share value is based on the IPH closing price on 11 March 2019," QANTM said.

"In considering the value of QANTM's offer to Xenith shareholders, QANTM's recent share prices are more relevant than the QANTM share price on 26 November, particularly given QANTM's strong 2019 half year results which were released on 22 February 2019."

Xenith put out a statement this afternoon stating it was reviewing IPH's proposal in conjunction with its advisors, noting its proposed merger with QANTM remained on foot.

IPH also claims its proposal will help accelerate Xenith's Asian growth objectives and give access to career opportunities for its people by leveraging more than 20 years' experience in the region with a substantial established presence in Singapore and Southeast Asia, as well as a growing business in greater China and other countries.

The suitor claims both companies are complementary with full-service patent and trademark attorneys and IP lawyers, and together they will be able to focus on innovation.

IPH also emphasises it has a successful track record of seven acquisitions since its ASX listing in 2014.

IPH has indicated its proposal would scrap the proposed merger of equals between Melbourne-based QANTM and Xenith, who both have previously dismissed the takeover attempt and proceeded with implementation plans for the merger.

A scheme booklet was sent to shareholders in late February, with a scheme meeting scheduled for 3 April.

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Author: Matt Ogg

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