ACCC weighs in on ASX-listed IP firm saga
The Australian Competition and Consumer Commission (ACCC) has spoken out about a proposed merger between ASX-listed IP firms QANTM and Xenith, and attempts made by IPH Limited to block it.
The regulator confirmed yesterday that it will not oppose the proposed merger between QANTM and Xenith, noting that both "are holding companies of intellectual property (IP) businesses and their merger would combine the second and third largest suppliers of IP services in Australia into one group".
According to an ACCC statement, its investigation focused on competition in the supply of Australian IP services, such as patents, trademarks, designs and plant breeder’s rights.
“We consulted with a large number of market participants and most customers did not express concerns,” ACCC chair Rod Sims said.
“For patent services, corporate customers rely on the expertise and infrastructure of large IP firms, such as those within QANTM and Xenith, to handle their work in complex technology areas and to manage their volume of patent filings. The merged QANTM-Xenith would have a market share of about 30 per cent of total patent filings. However, we found that a number of alternative firms are likely to continue to provide sufficient competitive constraint on the merged entity.
“Trademark services require less technical expertise than patent services, and therefore we believe several IP firms and commercial law firms are viable alternatives for customers, providing a competitive constraint. We also found no competition concerns in relation to designs services or plant breeder’s rights services.”
The merger proposal first came last year, with QANTM and Xenith entering into a scheme implementation deed. Xenith IP Group Limited then lodged a Scheme Booklet last month with the Australian Securities and Investments Commission (ASIC) for a proposed merger of equals with QANTM Intellectual Property Limited. The Scheme Booklet was sent to shareholders on 27 February 2019.
The implementation date of the merger is 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, fellow intellectual property firm IPH Limited, which holds a 19.9 per cent stake in Xenith, has been adamant that the merger between Xenith and QANTM should not go ahead, saying that should a vote proceed, it will use its shares in Xenith to vote against the merger with QANTM.
IPH then submitted a proposal to acquire Xenith for a combination of cash and IPH shares valued at $1.97 per Xenith share, noting that such an acquisition would see the biggest benefits to shareholders.
The ACCC said it is currently reviewing IPH’s acquisition of a 19.9 per cent interest in Xenith, and its proposal to acquire 100 per cent of Xenith.
“If there are competing proposals to buy a company, the ACCC reviews the proposals separately," Mr Sims explained.
"This decision on QANTM-Xenith should not be interpreted as suggesting a particular decision in the IPH-Xenith matter, and we have yet to make a decision in the IPH-Xenith matter."