IPH joins race for QANTM Intellectual Property with $265m offer

The scrip-based offer follows proposals from Rouse International and Adamantem Capital, with the latter currently negotiating a process deed with the target company regarding its $255 million offer. 

IPH previously attempted to acquire QANTM in 2018 for $240 million, but at the time the target rejected the offer and was fixated on getting a merger with Xenith IP over the line - an idea it sadly could not copyright, and was in the end pounced upon by IPH as the giant gobbled up the erstwhile competitor instead. 

In an announcement to the ASX this morning, QANTM revealed that overnight it had received an unsolicited, non-binding takeover offer from IPH to potentially buy up all shares in exchange for 0.291 IPH shares and a fully franked 11c special dividend of up to 11c per QIP share.

This would value QANTM at approximately $265 million, or $1.90, representing a 12 per cent premium to the last trading price.

IPH argues its offer is superior to those of Rouse and Adamantem not just given the "attractive value offered", but the ongoing ability for shareholders to participate in the benefits of the combination and have enhanced liquidity of IPH shares compared to unlisted shares via the Adamantem acquisition.

"Pursuing strategic and financially accretive M&A (mergers and acquisitions) has long been a core pillar of IPH's growth strategy and we are regularly assessing a range of potential transactions across the regions in which we operate," says IPH chief executive officer Dr Andrew Blattman.

"We believe that the time is right for a combination of QANTM and IPH and we see a compelling strategic rationale to the acquisition which will support a range of benefits to shareholders, employees, and clients.

"If successful, we look forward to pursuing a range of growth initiatives in partnership with the QANTM team, particularly in relation to continuing to invest in our ANZ service offering and leveraging our combined platform across Asia to increase our market penetration."

Implementation of the proposal would still be subject to IPH agreeing to a scheme of implementation deed, following satisfactory due diligence, and unanimous board support, plus approvals from the Australian Competition and Consumer Commission and the New Zealand Commerce Commission.

"QANTM shareholders do not need to take any action in relation to the IPH non-binding indicative proposal," the company states.

"QANTM is engaging with Adamantem in accordance with the process deed announced on 14 March 2024.

"There is no certainty that the IPH non-binding indicative proposal or the Adamantem indicative proposal (described in the announcement of 14 March 2024) will result in a transaction capable of being considered by shareholders."

UK-based IP company Rouse International Holdings started the bidding war on 27 February, which was followed by Sydney-based private equity group Adamantem around a fortnight later on 12 March.

QANTM reported underlying earnings growth of 25.7 per cent in the December half to reach $17.3 million, out of a total revenue of $74.2 million, which meant the group's profits outpaced revenue for the period as the latter grew by 8.1 per cent.

For the same period, IPH reported underlying earnings growth of 12.5 per cent to $90 million, and a 21 per cent lift in revenue to $274.4 million. The group currently operates in 10 jurisdictions, has more than 1,600 employees, and is involved in annual patent and trademark filings of 36,000 and 14,000 respectively. 

At the time of QANTM's results announcement on 19 February, shortly before the first bid was received by Rouse, QANTM’s chief executive officer and managing director Craig Dower said the first-half results of FY24 were the best since listing in 2016.

"We have seen strong organic growth in revenue and earnings across most of the group," he said.

"We delivered a number of milestones on our technology modernisation and business simplification programs, with upgrades to our IP management platforms and continued migration of production systems to the Microsoft Azure platform.

"We are developing an overall AI strategy and policy framework, which will leverage the unique capabilities that exist within Sortify.tm, as well as tap into the technical and IP experience of practitioners across the group."

He added that QANTM's employee retention levels were high relative to the industry, and the strong results came despite some fluctuation in filings in the half, most notably internationally as Australian trade mark filings were "solid".

"Sortify.tm continues to be the number one filer of trade marks in Australia, and number two in New Zealand. On patent filings, we experienced a soft first quarter and an improved second quarter," Dower said.

"We are seeing solid momentum in patent filings early on in the second half of FY24.

"We also continue to maintain a positive outlook for the industry as a whole, and expect to see continued growth across our three businesses: DCC, FPA and Sortify.tm."