Imperial welcomes IP Group’s improved offer for Touchstone

IP GROUP has raised its offer for rival science commercialisation outfit Touchstone Innovations to £496m and secured the backing of the target company’s founder Imperial College in an effective knockout blow in the hostile takeover battle.

The news takes support for the deal to 89.7pc, allowing IP Group to de-list Touchstone from the Aim market and squeeze out any minority shareholders.

FTSE 250-listed IP Group originally tabled a firm all-share offer worth £466m for Touchstone on June 19, but the value of the deal crashed below £400m over the intervening weeks as the share prices of both firms fell.

Touchstone’s board rebuffed the original offer and David Newlands, its chairman, wrote to shareholders to say it was “unwelcome”, arguing it undervalued the company, was a bad fit for the two firms, and risked driving out quality staff.

Responding to the improved offer, Touchstone said it “welcomes any increase” but described it as “modest” and below its own valuation of its net assets per share of 312p. It advised shareholders to take no action and said a full response would be circulated within a fortnight.

IP Group’s shares rose 1.2pc to 138.6p yesterday, valuing its revised all-share offer for each Touchstone share at 307.4p, representing an 12pc premium on Monday’s close of 274p. Touchstone shares rose 6.4pc to 291p.

IP said each Touchstone shareholder would receive 2.2178 new IP shares for each Touchstone share, compared with the original 2.1575 offer, giving Touchstone shareholders a stake in the combined company of around 34pc. The deal was always likely to go through despite Touchstone’s opposition as IP had the support of the firm’s three largest shareholders – star investor Neil Woodford, hedge fund Lansdowne and institution Invesco – which together own 74.5pc of Touchstone’s stock, as well as half of IP’S.

None the less, industry sources believed Imperial College – which owns 15.3pc of Touchstone and originally spun it out in 1986 to commercialise its scientists’ work – could have destabilised the deal had it come out strongly against it. Instead, Imperial College welcomed the improved offer. The endowment board of the university said: “We are supportive of the strategic rationale of this transaction and appreciate the increased value for Touchstone’s shareholders.”

Both IP and Touchstone invest in technology and research in partnership with universities to bring emerging ideas and technology to market.

IP says the tie-up will create an international leader in commercialising innovation.

£496m The improved offer for Touchstone. IP says the tie-up will create an international leader in commercialising innovation