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3 August 2017

Touchstone throws down the gauntlet

Touchstone Innovations has doubled down in its efforts to prevent a hostile takeover by rival IP Group, saying the updated offer continues to undervalue the firm.

Author: Thierry Heles, editor

The board of Touchstone Innovations, the commercialisation firm spun out of Imperial College London, has reinforced its view that its competitor IP Group’s acquisition offer undervalues the firm, the Telegraph wrote on Monday.

The affirmation that Touchstone’s board remains against a takeover follows IP Group’s decision to up the offer to £490m ($640m) in July from the original £466m.

That offer continued to fall short of Touchstone’s net assets, the value of which stood at £502.2m as of June 30 – roughly a 10% increase from the £455.9m at the start of its financial year in August 2016. The value of its 113-strong portfolio meanwhile stands at £440.3m.

IP Group has managed to secure the backing of 89.7% of Touchstone’s shareholders, including that of Imperial College London, meaning it could force a de-listing of Touchstone from Aim – as that threshold is only 75%.

David Newlands, the chairman of Touchstone who previously already wrote a letter to shareholders, reiterated his stance in a new letter saying the improved offer “continue to fundamentally undervalue Touchstone”.

Newlands hopes Touchstone’s remaining investors will hold out until it is declared unconditional at the 90% approval.

If the merger goes ahead, Touchstone’s shareholders would hold a 33.9% stake in the combined entity. That figure is however below the net asset value that Touchstone would contribute to the group, at 36.1%, according to calculations by Touchstone’s board.

Newlands has also pointed out that Touchstone’s portfolio is more mature and more diversified – IP Group’s valuation heavily relies on Oxford Nanopore, a University of Oxford spinout that is working on a portable DNA and RNA sequencer and that makes up 37% of IP Group’s portfolio.

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