IPH And Xenith Enters The Scheme Implementation Deed To Acquire Xenith

IPH And Xenith Enters The Scheme Implementation Deed To Acquire Xenith

IPH Limited (ASX: IPH) is an ASX listed company working in the industrial sector. It Is a holding company of four high-quality businesses which are specialised in the area of IP services and products. The company has a team of approximately 600 employees in various countries including New Zealand, China, Australia, Hong Kong, etc. The company has a client base of prestigious clients like Fortune Global 500 companies, professional services firms, public sector research organisations, etc.

On 12th April 2019, IPH announced that it has entered a binding scheme implementation deed with Xenith IP Group Limited. Under the scheme, IPH has proposed to acquire 100% stake in the Xenith for a combination of cash and IPH shares. The cash component of the scheme will be funded by IPH’s existing debt facilities and the share component will be issued at a price of $6.90 per IPH share.

Under the terms and conditions, the shareholders of the Xenith will be entitled to receive standard consideration of $1.28 in cash and 0.1261 IPH shares for every Xenith share which is valued at $2.15 per Xenith share based on IPH’s closing price on 5th April 2019 of $6.90 per share. The total value of consideration payable by IPH is approximately $154 million.

This value of A$2.15 per Xenith share represents a 12% premium to the Xenith closing price of $1.925 on 5th April 2019. It is also at a premium of 42% to the mid-point of the Xenith valuation of $1.515 which was conducted for the purposes of the proposed merger of Xenith with QANTM Intellectual Property Limited. The scheme of the valuation considers a fully diluted market capitalisation of Xenith to be approximately $191.7 million with approximately $206.8 million of enterprise value.

The shareholders of Xenith may also elect to receive maximum cash consideration per Xenith share under the “Mix and Match” facility. This provides flexibility in addressing the particular preferences of individual shareholders. However, this facility is subject to scale-back mechanism under which IPH will pay maximum cash consideration of approximately $91.4 million and issue a maximum number of shares of approximately 15.6 million.

This move by IPH was not a surprise as earlier on 12th March 2019, IPH had already introduced its proposal to acquire the full stake in Xenith and further on 8th April 2019, revised the proposal. But under the scheme implementation deed between Xenith and QANTM Intellectual Property Limited, QANTM must be notified and was given three business days to match the terms of the Updated IPH Proposal of which the last date was 11th April 2019. QANTM declines to make any updated proposal till the deadline which got expired yesterday. This expiration of the period led to further development in the IPH’s proposal to acquire Xenith.

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The market capitalisation of IPH stands at A$1.37 billion. On the technical front, the stock price increased by 2.014% and traded at A$7.090 on ASX after making the intraday high of A$7.100 as of 12th April 2019 (AEST: 2:17 PM). In the last six months, the stock has given a good return of 25% while the YTD return stands at 28.23%.


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