XIP released their response yesterday. Leaving aside the control...

XIP released their response yesterday. Leaving aside the control and ACCC issues which are subjective (although I agree there is no premium being offered by IPH just a similar cash/script value), the XIP employees and QIP holdings seem to be sufficient to sideline IPH without a better offer or am I mis-reading?

XIP Response:

The principal reasons for this conclusion include the following:

a) The IPH Proposal is a fundamentally different transaction from the proposed XIP/QIP merger, even though it seeks to use a similar scheme of arrangement structure. 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. 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.

b) In terms of value the IPH Proposal was framed to be approximately equivalent to the implied value to Xenith shareholders of the XIP/QIP merger as at 11 March 2019, without the control premium normally associated with outright control.

c) The IPH Proposal has materially higher execution risk than the XIP/QIP merger in terms of ACCC clearance. 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. 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.

d) It is open to question as to whether the IPH Proposal as currently framed would win support from Xenith employee shareholders who hold over 40% of Xenith shares.

e) The significant cash component of the IPH Proposal is unlikely to attract the capital gains tax rollover relief which would generally be available in a pure scrip for scrip transaction such as the XIP/QIP merger.