The board of intellectual property company Xenith (ASX: XIP) is not impressed by a 9 per cent lift in IPH's (ASX: IPH) takeover offer, and will press on with another merger in the works.
In an announcement today the group concluded IPH had not presented a superior offer to the merger deal underway with QANTM Intellectual Property (ASX: QIP), noting the transactions would be "fundamentally different".
Xenith noted the terms of value of IPH's offer were framed to be equivalent to the XIP/QIP merger, yet lacked the control premium normally associated with outright control.
"The XIP/QIP merger results in shared future control with Xenith shareholders holding 45% of the merged entity and standing to benefit from 45% of the earnings accretion expected to result from the merger," the board said.
"In addition, Xenith shareholders will have half the board representation of the merged entity.
"By contrast, the IPH proposal is an outright control transaction in which Xenith shareholders would own less than 5% of the merged entity."
Xenith also pointed to a "materially higher execution risk" in the IPH proposal in terms of clearance from the Australian Competition and Consumer Commission (ACCC).
"IPH already has a significantly higher market share than either of Xenith or QANTM. If the IPH proposal were implemented, the merged group would be by far the largest player in the market," the board said.
"By contrast, the XIP/QIP merger would result in a market more evenly balanced between two listed players of roughly equivalent size and differentiated in terms of service offering."
The sought-after firm also mentioned the significant cash component of the IPH proposal was unlikely to attract the capital gains tax rollover relief that would generally be available in a pure scrip for scrip transaction such as the XIP/QIP merger.
In a statement, the board of QANTM has reiterated its support for the XIP/QIP merger, citing compelling financial, strategic, cultural and operational benefits.
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