On 13 February 2019, IPH Limited (ASX: IPH), a company from the industrial sector offering intellectual property services, announced the proposed acquisition of approximately 19.9% stake in Xenith IP Group Limited (ASX: XIP), at a price of $1.85 per share.
IPH stated that it remains consistent with its strategy to make acquisitions in the domestic market from a strategic and financial point of view and has obtained debt funding facilities of approximately $33 million.
Other than this, IPH stated that it intends to have a discussion with Xenith and QANTM regarding the alternative transaction to the current Xenith scheme, to be acquired by QANTM Intellectual Property Group Limited (ASX: QIP). IPH is of the view that there might be scope for an alternative transaction involving a strategic combination of one of these businesses which has the potential to create significant shareholder’s value.
Also, IPH claims that it does not support the current Xenith scheme to be acquired by QANTM Intellectual Property Group Limited and is not in favor to vote for it.
However, Xenith has claimed that it has not obtained any intimation from IPH. It asserted that it intends to proceed further with the implementation of the proposed merger of equals with QANTM as per the Scheme Implementation Deed dated 26 November 2018. At present, it is also working on fulfilling the conditions of the Scheme Implementation Deed. Also, the board members of the Xenith IP Group Limited (ASX: XIP) are convinced with the benefits of the proposed merger, which it highlighted in the presentation given on 27 November 2018. However, Xenith highlighted that any transaction related to any potential transaction which involves IPH under the current Xenith scheme is subjected to ACCC approval
In response to IPH and Xenith, QANTM stated in reference of its announcement on 27 November 2018 and 29 November 2018, that it was engaged with IPH regarding an indicative, conditional and non-binding proposal by IPH to acquire QANTM. However, after the announcement on 29 November 2018, QANTM neither did not receive any revised or updated version of the Indicative Proposal nor any communication from IPH regarding an alternative transaction to the current scheme of arrangement that was proposed by Xenith. Based on this, QANTM also intends to proceed with the implementation of the proposed merger of equals with Xenith.
On 27 November 2018, QANTM Intellectual Property Ltd and Xenith IP Group Limited entered into the merger of equals, not considering the conditional and non-binding proposal from IPH, in line with the interests of the shareholders. The QIP shareholders were expected to own 55%, and XIP shareholders to own 45% of the merged entity. It was highlighted that through this merger, XIP would be able to achieve a cost synergy of $7 million per annum which can be fully realized by the end of 3 years, based on the merged group’s FY’18 proforma EBITDA OF $45.2 million. This was also expected to generate enhanced earnings per share for both companies’ shareholders.
Stock performance (As at closing of trading session on 13 February 2019):
The shares of IPH closed the session at A$6.080, up by 2.19% as compared to the previous trading day’s closing price with the market capitalization of A$1.17 billion and approximately 197.34 million outstanding shares.
The QIP stock soared by 5.44%, settling at A$1.550 with the market capitalization of A$195.58 million and approximately 133.05 million outstanding shares.
The XIP stock sky-rocketed by 20.285%, closing the day’s session at A$1.690 with the market capitalization of A$124.65 million and approximately 88.72 million outstanding shares.
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