Xenith IP Group (ASX: XIP) is a holding company of many specialist intellectual property (IP) services firms which provides a broad range of intellectual property (IP) service like registration, management commercialization IP rights for clients.
On 12th March 2019, the company stated that it has received a proposal from IPH Limited (ASX: IPH) under which IPH would acquire 100% stake in Xenith Group via a scheme of arrangement. IPH is another intellectual property (IP) services company with dominance in Asia -Pacific region. This proposal is currently being reviewed by the company with its advisors, and therefore its proposed merger with QANTM Intellectual Property Limited is still standing firm.
According to IPH, the company is offering a healthy premium for the acquisition on all fronts. The offer price is quoted to be $1.97 which stands at 23.3% premium to Implied QIP merger value, 30% premium to Independent Expert Valuation and 22.7% premium to Close price (prior to IPH Proposal).
Post the acquisition, Xenith and its shareholders will be provided with lots of benefits such as
- The combined group will become the leading IP services provider in secondary IP markets
- IPH will provide significant cash consideration for the acquisition
- The combined market capitalisation would exceed $1.3 billion, providing significant capital strength for future opportunities
- As IPH is included in ASX 200, the combined entity will enjoy the benefits of liquidity
- The combined group would offer Xenith’s IP practices, their attorneys and clients immediate access and benefits to already established Asian geographic platform in which IPH has invested for over 20 years.
- A high premium is being offered against the recent trading price of XIP shares, the Independent Expert valuation and QIP Merger consideration
IPH also stated that this proposal would be superior to QIP merger as
- High cash consideration of 65% is providing certainty of value
- Greater capital strength to exploit future growth opportunities
- This proposal is a binding offer, with minimal conditions, substantially similar to the QIP merger
- Enhanced stock liquidity and inclusion in the ASX 200
- Significant premium being offered as compared to QIP merger consideration
Comparing the stock price performance of both the companies, XIP has given a negative return of 45% since its listing in November 2015 whereas IPH’s stock has more than doubled since listing in November 2014 and currently standing at 110% return to the shareholders. Clearly, the XIP and its shareholders would be able to participate in the growth, development and potential upside on IPH.
This is not the first acquisition of the company and IPH has acquired a lot of high potential businesses in the past. In April 2015 the company acquired IP data analytics company Practice Insight and WiseTime. Another acquisition was made after almost a year later in May 2015, which was an Australian IP firm, Fisher Adams Kelly. Latest being the acquisition of AJ Park in New Zealand in October 2017.
On 27th February 2019, XIP announced its half year results ending December 2018.
On 12th March 2019, the stock surged up by more than 14% and closed at A$1.83 compared to the previous day’s closing of A$1.605. In the last month, the stock rallied by more than 16%, adding significantly to the YTD return of 19.7%.
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