IPH Limited today published the response to Xenith IP for disparaging its acquisition offer on the terms that the “IPH Proposal as presently framed is not a Superior Proposal.”
Last week, Intellectual Property services company IPH Limited (ASX: IPH) proposed a similar looking Xenith IP Group to acquire all its shares at a value of $1.97 per Xenith share, including both cash and share component in the consideration. This translates a consideration of $1.28 cash plus 0.1056 IPH shares for each Xenith share.
Xenith compared the IPH proposal to the merger transaction knocking on its door with QANTM Intellectual Property Limited so as to see if IPH Proposal could bring superior value to the organisation and its shareholders. Following the rigorous review, Xenith concluded that IPH Proposal as presently framed is not a Superior Proposal in comparison to the proposed merger with QANTM.
The conclusion was drawn on several factors including the price comparison in respect to which Xenith stated that the IPH Proposal was framed to be approximately equivalent to the implied value to Xenith shareholders for the XIP/QIP merger as at 11 March 2019 without the control premium typically associated with outright control. To this, IPH responded that IPH Offer is higher and as at market close on 19 March 2019 had increased in value to $1.99 per Xenith share, relative to the implied value of the QANTM Merger at market close on 19 March 2019 of $1.74 per Xenith share. Moreover, IPH offer price reportedly reflects a 31% premium to the mid-point of the Independent Expert valuation for Xenith shares.
IPH also refuted the Xenith control concerns on the ground that the consideration offered under the IPH Proposal comprises an approximately 35% equity component in the form of IPH shares. It also believes that the strategic, operational and financial merits of the IPH Proposal, including its existing platform in Asia, provide the potential to share in greater upside than the QANTM Merger.
Touching to the risks associated with the proposed transaction, Xenith stated that the IPH Proposal has materially higher execution risk than XIP/QIP merger in terms of ACCC clearance. IPH replied that it cannot prejudge the assessment of the ACCC and does not believe that Xenith should either. However, IPH considers the ACCC’s assessment of the IPH Proposal and the QANTM Merger will involve consideration of substantially the same issues.
The company tried to further convince the Xenith shareholder by stating that its established presence in Singapore, South East Asia and Greater China would help to accelerate Xenith’s growth objectives in Asia and provide career opportunities for its people. On legal aspects, IPH stated that its offer is binding and capable of acceptance by Xenith, with minimal conditions which are similar in substance to those of the QANTM Merger, including no objection from the ACCC.
IPH stock price surged by 1.788% while trading towards its 52-week high levels on 20 March 2019. The stock last traded at $6.830 with a price to earnings multiple of 29.240x and a market capitalization of $1.32 billion as at 20 March 2019.
Over the past 12 months, IPH stock price has witnessed a positive momentum of 97.35% including a surge of 20.04% in the past three months.
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