Lawyers Weekly can confirm Xenith IP Group Limited lodged a Scheme Booklet Tuesday evening with the Australian Securities and Investments Commission (ASIC) for a proposed merger of equals with QANTM Intellectual Property Limited. The Scheme Booklet will be sent to shareholders on 27 February 2019, putting the merging process one step closer to completion.
The lodging follows QANTM Intellectual Property and Xenith IP Group’s entering into a scheme implementation deed to merge through an all-scrip scheme of arrangement late last year.
At the time the news broke, it was declared that the implementation date of the merger was expected in April 2019, subject to usual conditions precedent for a scrip merger, including: no regulatory intervention, Xenith shareholder approval, and other customary conditions.
However, since then, fellow intellectual property firm IPH Limited has acquired a 19.9 per cent stake in Xenith, and is understood to be against the merger between Xenith and QANTM. This is despite an independent expert’s report from Lonergan Edwards & Associates Limited concluding that the Scheme is “in the best interests of Xenith shareholders, in the absence of a Superior Proposal; and that the merger terms are fair and reasonable to Xenith shareholders,” according to a statement from Xenith chair Sibylle Krieger.
“The proposed merger has now cleared two important milestones, namely a review by corporate regulator ASIC and initial Federal Court scrutiny. The court has ordered that eligible Xenith shareholders will have the opportunity to vote on the proposal at a Scheme Meeting on 3 April 2019,” Ms Krieger said.
“The directors unanimously recommend that, in the absence of a Superior Proposal, Xenith shareholders vote in favour of the scheme. The Directors intend to vote in favour of the scheme, in the absence of a superior proposal.
“Xenith is yet to receive any formal notification from IPH Limited regarding its intentions, following IPH’s recent acquisition of a 19.9 per cent stake in Xenith. IPH has not revealed its strategic intent other than to state that it proposes to vote its recently acquired shares against the merger.
“Unless and until Xenith’s board is presented with a formal proposal to consider, the market and those who watch the market will be left to form their own conclusions as to the motivation behind IPH’s stake in the company.
“Any consolidation in the listed IP Services sector is likely to require ACCC clearance. QANTM (with Xenith’s assistance) has sought this approval and a provisional date for announcement of ACCC’s findings is currently scheduled for 21 March 2019. Xenith notes that the ACCC is reviewing the IPH share acquisition under section 50 of the Competition and Consumer Act, which prohibits the acquisition of shares if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market. We will await the ACCC’s findings with interest.”
Further, Ms Krieger took a swipe at IPH’s make-up, saying there are stark differences between it and Xenith and QANTM’s offering.
“It is clear to all those who work in the IP sector and those who follow it that there is a distinct difference in the business model and the culture of IPH on the one hand and of Xenith and QANTM on the other hand. These cultural differences are of great importance to the professionals who work in the sector and who are the key drivers of long term value,” she said.
“We are committed to the merger of equals with QANTM and regard the deal outlined in the Scheme Booklet as the right strategic outcome for the two companies and for the industry as a whole.
“The merger can create significant value for shareholders by combining two culturally aligned groups that share common values, vision and strategy for the future. The merger of equals will create a leading provider of IP services in Australia. The merged group will offer a broad base of highly complementary patent, trade mark, legal and strategic innovation advisory services.”
Lawyers Weekly understands that Xenith CEO Craig Dower and QANTM managing director Leon Allen have been meeting institutional investors over the past week, and together with the support of Xenith vendor principals, they are very confident that the merger will be passed at the scheme meeting on April 3, regardless of IPH’s blocking moves.