QANTM IP chooses a suitor – and it’s not the one with the money and the car
In what could be the nerdiest ASX marriage this year, intellectual property business QANTM has chosen its future life partner: smaller rival Xenith IP.
The two companies announced a merger of almost-equals on Tuesday morning.
QANTM (ASX:QIP) shareholders will own 55 per cent of the new company, and Xenith (ASX:XIP) shareholders will be left with 45 per cent.
But the relationship has come at a cost: $1 billion intellectual property company IPH Group (ASX:IPH) had been wooing QANTM.
Just as the Xenith-QANTM news was released, spurned IPH revealed its offer made on November 20: a cash and scrip deal of $1.80 for every QANTM share.
It was a 42 per cent premium to QANTM’s closing price the day before.
The object of IPH’s affection shunned the offer, saying they didn’t think it would convince the most important people in QANTM’s life — their shareholders.
A QANTM spokesman said the deal was knocked back due to the level of uncertainty of it proceeding, as it was highly conditional and non-binding.
Then Xenith slipped in with a scheme of arrangement, a proposal that requires court approval.
This proposal gives QANTM the upper hand as while it’s a merger, it is effectively a takeover of Xenith.
The deal values Xenith shares at $1.598, and will give that company’s shareholders 1.22 QANTM shares for every one they own in Xenith.
IPH shares slipped and QANTM shares added 7 per cent after the market opened, but Xenith stock is up 11 per cent.
“The transaction will create a market leading group of independent intellectual property services businesses in Australia, New Zealand and Asia with a pro forma market capitalisation of approximately $285.2 million,” QANTM told investors on Tuesday.
The pair justified their marriage saying it would leverage QANTM’s presence in Asia with Xenith’s desire to expand there, as well as provide the financial firepower to make acquisitions in the region.
The pair speculate that the merged group’s fiscal 2018 EBITDA (earnings before interest tax, depreciation and amortisation) on a pro forma basis would have been $45.2m.
QANTM chairman Richard England said the two companies “have great respect for each other” but each business will continue to operate independently after the merger.
The scheme is expected to be put to a shareholder vote in March next year.