What did the ACCC say about the merger?
The ACCC noted that the merger would combine the second and third largest suppliers of IP services in Australia into one group, with the largest currently being IPH Limited (ASX: IPH).
The ACCC’s investigation focused on competition in the supply of Australian IP services such as patents, trademarks, designs and plant breeder’s rights.
After consulting with a large number of market participants, the ACCC noted that most customers did not express concerns about the merger.
This is largely due to the fact that corporate customers rely on the expertise and infrastructure of large IP firms to handle their work in complex technology areas and to manage the volume of patent filings.
The ACCC estimates that the merged entity would control ~30% of the total patent filings market but believes that enough competition constraints exist in the market to keep the newly-merged entity in check.
What about IPH’s acquisition proposal?
The ACCC also said it is reviewing IPH’s acquisition of a 19.9% interest in Xenith and its proposal to acquire 100% of Xenith separately but is yet to make a decision on the IPH-Xenith matter.
Following Xenith’s rejection of the IPH takeover proposal earlier in the week, IPH responded by saying it was “disappointed” that the Xenith Board had formed that view and that it planned to pursue the QANTM-Xenith merger.
IPH maintains that its proposal is superior to the QANTM merger and delivers “compelling benefits” for Xenith’s shareholders and other stakeholders, with IPH management believing that its proposal values Xenith at $1.99 per share compared to the QANTM merger value of $1.74 per Xenith share.
So what should I be buying?
The ACCC approval is a big step forward for Xenith and QANTM in sealing the deal, while IPH will no doubt be disappointed in the decision as it tries to block the planned merger.
I think the muddied ownership and ongoing regulatory scrutiny is too messy for my liking and I’d rather add one of these top growth shares to my portfolio ahead of Xenith or IPH at the moment.
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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended IPH Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.