Melbourne-based Qantm Intellectual Property (ASX: QIP) will join forces with Xenith IP Group (ASX: XIP) in a $285 million merger which is expected to create an “industry leading” group of independent IP businesses servicing markets in Australia, New Zealand and Asia.
The two companies will merge in April 2019 to create a single IP services group, through an all-scrip Scheme of Arrangement whereby Xenith shareholders will receive 1.22 Qantm shares for each Xenith share held.
On completion of the transaction, Qantm and Xenith shareholders will own 55% and 45% respectively of the new group, expected to offer a broad base of complementary patent, trademark, legal and strategic innovation advisory services.
Qantm owns intellectual property companies Davies Collison Cave, FPA Patent Attorneys and Malaysia-based Advanz Fidelis IP Sdn Bhd, and employs over 140 staff.
The merger with Xenith will leverage Qantm’s existing presence in Asia with Xenith’s growing operations and opportunities in the same region and place both companies in a better position to address the high-growth market.
Qantm said the increased scale will also enable the merged group to realise the benefits of a streamlined corporate management and shared back-office services, and to invest in common, world-class technology platforms.
The resulting operational efficiencies will drive margin improvement across the independent businesses with consistent practice management discipline.
“While each business will continue to operate independently in supporting their clients, the increased scale will enable the merged group to achieve strategic objectives more quickly and more effectively,” said Qantm chair Richard England.
“With a high degree of strategic alignment and identified synergies, we believe the transaction will generate significant value for shareholders.”
Xenith shareholders will be given the opportunity to vote on the proposed scheme at a meeting in late March 2019.
Subject to their approval, and other conditions of the scheme being satisfied, the merger is expected to be implemented in April.
Shortly after announcing the planned merger with Xenith, Qantm officially rejected a takeover bid by intellectual property giant IPH Limited (ASX: IPH) – one of the Asia-Pacific region’s biggest IP groups providing services across Australia, New Zealand, Papua New Guinea, the Pacific Islands and Asia.
IPH made a number of unsolicited, non-binding, conditional offers to merge with QANTM through a scheme of arrangement, culminating last week in a proposal with an equivalent value of $1.80 per Qantm share.
The proposal comprised a cash and scrip offer with an equivalent value of $1.75 per share and a dividend payable to Qantm shareholders capped at 5 cents for the half-year ending 31 December 2018.
At the date of the proposal, this represented a premium of 42% to the Qantm closing price of $1.265 and a 40% premium to Qantm’s 30-day volume weighted average price of $1.29.
Mr England said the board rejected IPH’s proposal on the basis that it was “highly conditional, and entailed significant execution risk” and was therefore not considered to be in the best interests of Qantm shareholders.
He said the proposed merger with Xenith was “significantly less conditional” than IPH’s indicative proposal, with satisfactory due diligence having been completed and the scheme implementation deed executed.
“The merger with Xenith follows an extended period of engagement [and] represents compelling value for [our] shareholders,” Mr England said.
“[It has] a high degree of certainty around execution and is reinforced by significant strategic and cultural alignment between the two groups.”
News of the merger saw shares in Qantm Intellectual Property move 8.02% higher by mid-afternoon to $1.415, while Xenith IP Group shares were up 12.45% to $1.400.
Shares in IPH Limited dropped 1.39% to $5.325.