ASX 200 stock slips after joining takeover contest with $250 million bid

Are we about to see a bidding war unfold as an ASX 200 company joins the contest?

| More on:
Multiple ASX share investors take on one another in a tug of war in a high rise building.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The S&P/ASX 200 Index (ASX: XJO) is higher this morning, but the same can't be said for this ASX 200 stock.

Shares in IPH Ltd (ASX: IPH) are faltering this morning after the intellectual property services provider revealed a takeover bid for one of its peers. The bid, worth roughly $250 million, is being met with a 0.7% decline to $6.11 in the IPH share price.

Which competitor is this ASX 200 stock buying?

Few people have likely heard of QANTM Intellectual Property Ltd (ASX: QIP). At just shy of a $250 million market capitalisation, it's not quite in the 'big leagues' of the ASX. However, that hasn't prevented the company from receiving its fair share of interest this year, setting the share price into motion.

On 27 February, QANTM cleared the air amid media speculation that it was subject to an offer. Indeed it was. A non-binding indicative proposal from UK-based international intellectual property (IP) firm Rouse International Holdings, aka Rouse.

The interest didn't stop there either.

Two weeks later, QANTM was fielding yet another offer. This time from Adamantem Capital, an Australian private equity firm that manages around $1.4 billion worth of assets, offering $1.817 per share.

Rouse has since dropped out of the running. But a new contestant has now entered the fray, with fellow ASX-listed IPH lobbing a bid at QANTM this morning.

As per the release, IPH is putting forward a scheme of arrangement of 0.291 IPH shares and a fully franked special dividend of up to 11 cents per share in cash for each QANTM share. In simplified terms, it values QANTM at $1.90 apiece.

QANTM extended its exclusivity period with Adamantem to 15 May 2024 on Monday.

Why?

A quick look at IPH's balance sheet might give some pause for thought.

The ASX 200 stock is saddled with over $500 million in debt as of 31 December 2023, with about $126 million in cash and cash equivalents. The company is already highly leveraged at a debt-to-equity ratio of approximately 81%.

So, what's the rationale here?

IPH CEO Dr Andrew Blattman explains the thinking behind the offer, stating:

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. 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.

Furthermore, Blattman expressed excitement about the potential to increase the company's presence in Asia if the takeover is successful.

While the ASX 200 stock might be down, shares in QANTM are up 7.4% on today's news.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended IPH. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Mergers & Acquisitions

A Chinese investor sits in front of his laptop looking pensive and concerned about pandemic lockdowns which may impact ASX 200 iron ore share prices
Mergers & Acquisitions

Star Entertainment share price dives 10% on Hard Rock update

Takeover rumours have been swirling around ASX 200 casino operator Star Entertainment.

Read more »

Young man sitting at a table in front of a row of pokie machines staring intently at a laptop. looking at the Crown Resorts share price
Mergers & Acquisitions

Are Star shares now rolling the dice on a rescue bid?

Rumour is that a US-based casino operator is ready to revamp this fallen star.

Read more »

A man closesly watch a clock, indicating a delay or timing issue on an ASX share price movement
Mergers & Acquisitions

BHP shares charging higher as the clock ticks down on the Anglo American takeover

BHP has less than three days before the clock runs down on its $64 billion Anglo American takeover bid.

Read more »

People sitting in rows in a meeting with one person holding their hand up as if to ask a question.
Mergers & Acquisitions

Buying BHP shares? Here's what's happening with the Anglo American takeover

BHP’s Mike Henry and Anglo American’s Duncan Wanblad are manoeuvring for shareholder approval.

Read more »

two hands shake in close up at the side of a mine. One party is wearing high visibility gear and there is earth and heavy moving equipment in the background.
Resources Shares

Why more ASX mining shares could soon turn to takeover bids

The rush of mining shares merging on the ASX is a good thing, says this expert.

Read more »

Miner and company person analysing results of a mining company.
Mergers & Acquisitions

BHP share price slides amid no deal on 'compelling opportunity'

BHP’s Mike Henry responded to Anglo American’s rejection of the improved takeover deal.

Read more »

a sad looking engineer or miner wearing a high visibility jacket and a hard hat stands alone with his head bowed and hand to his forehead as he speaks on a mobile telephone out front of what appears to be an on site work shed.
Materials Shares

BHP shares on watch after new $64b Anglo American takeover offer rejected

It wasn't second time lucky for the Big Australian. Will it try again?

Read more »

A young boy sits on his father's shoulders as they flex their muscles at sunrise on a beach
Resources Shares

How this ASX mining stock more than doubled investors' money in 1 month

Some investors will have realised gains of 134% from the ASX mining stock in just three weeks.

Read more »