By Peter Frankl.
IPH Limited will acquire Xenith IP Group Limited
IPH increased its original offer by only a small amount, from $1.97 per Xenith share to $2.15. Within days of the new offer the Xenith Board unanimously recommended acceptance.
The offer from IPH is $1.28 cash per Xenith share with the balance paid in IPH shares. IPH, in its revised offer, did not increase the cash component.
It has been one dramatic move after another to reach this point.
It began with Xenith and QANTM IP moving towards a merger which was announced on 27 November 2018. This appeared to be a sound strategic move to create a scaled-up competitor to IPH.
On 13 February 2019 IPH disclosed that it had acquired 19.9% of Xenith shares. It declared that it would use its new shareholding to vote against the proposed merger between Xenith and QANTM.
Xenith arrived on the ASX in November 2015. It has had great success in acquiring other firms and growing in size. It has had no success in matching the profitability of IPH. Xenith’s share price reflected this lack of profitability. From this perspective, it has been an undervalued company.
IPH’s acquisition of 19.9% had little downside because of the low value of Xenith shares. Whatever direction Xenith took, its share price had a much greater likelihood of increasing than decreasing.
IPH put a proposal to Xenith shareholders for the acquision of their shares on 12 March 2019. The ACCC announced that it would not oppose such a takeover. This original offer was rejected by Xenith but the updated proposal on 8 April 2019 swiftly won over the Xenith Board.
QANTM was given an opportunity to make a counter offer which it declined to do.
The schedule for the acquisition culminates in a completion date of 9 August 2019.
The combined group will have 1,000+ employees, 440+ professional staff and annual revenue of $350m+. QANTM will be its largest Australian competitor at around one third of its size.