IP Group updates on Touchstone offer

IP Group has confirmed that under the terms of its Offer to acquire Touchstone Innovations, should it be accepted, Touchstone shareholders will receive 2.1575 New IP Group Shares in exchange for each share held in Touchstone.

The Company provided the following additional information:

The financial terms of the Offer remain unchanged from those set out in the Possible Offer Announcement, as adjusted for the Capital Raise.

- Based on the Exchange Ratio and the Closing Price of 134 pence per IP Group Share on 19 June 2017 (being the last Business Day prior to the date of this Announcement), the Offer values each Touchstone Share at 289 pence and Touchstone's existing issued ordinary share capital at approximately £466 million

- Assuming acceptance of the Offer in full, the Offer will result in Touchstone Shareholders owning approximately 33 per cent. and IP Group Shareholders owning approximately 67 per cent. of the Combined Group

The Board of IP Group believes that the combination of IP Group and Touchstone would create an international leader in IP commercialisation and a combined business with substantial capabilities that is greater than the sum of the two parts

- The Offer will allow Touchstone's Shareholders to continue to benefit from exposure to Touchstone's investments and, through IP Group, gain access to its portfolio. The Offer will also provide Touchstone's shareholders with an opportunity to hold shares in a Combined Group which the IP Directors expect to have greater liquidity than is currently the case

- IP Group attaches great importance to the skills and experience of the existing management and employees of Touchstone and has always intended to leverage the strengths of both businesses and to build on the expertise, networks and relationships developed in both companies. Consequently, IP Group expects expanded job and career opportunities for colleagues from both firms

IP Group's wider proposal to Touchstone provided:

- Two non-executive directors on the Touchstone Board to become non-executive directors of the Combined Group, one to become senior independent director and the other to be appointed as chair of the remuneration committee, as selected by IP Group;

- Russ Cummings to join the board of the Combined Group as CEO of Touchstone and, together with IP Group's COO, to lead an integration team to identify, retain and build on the best of both companies;

- The three current executive directors of Touchstone to join the executive committee of the Combined Group during the integration period;

- Confirmation of IP Group's intention to continue the ordinary course operation of both companies' investment teams and maintain stable headcount in both investment divisions for a minimum of 12 months; and

- Confirmation that two of Touchstone's focus areas for investment, therapeutics and digital, are consistent with IP Group's current four sectors, Biotech, Cleantech, Healthcare and Technology and that we would therefore envisage continuing to support companies in these scientific areas in the Combined Group.

IP Group and its advisors have had a number of conversations with Touchstone and its advisors over the last three months regarding variations of this proposal. As recently as 16 June, this proposal was rejected by Touchstone as the basis for a recommended deal. However, IP Group remains committed to all five elements of its proposal listed above. IP Group has received support for the Offer from holders of Touchstone Shares representing, in aggregate, 74.3 per cent. of Touchstone's issued share capital. Since the Possible Offer Announcement, IP Group has sought further discussions with the Touchstone Board regarding the Offer. Although a recommendation could not be reached, the Board of IP Group believes that Touchstone Shareholders should have the opportunity to decide on the merits of the Offer. After the Offer becomes or is declared unconditional in all respects and IP Group has by virtue of its shareholdings and acceptances of the Offer acquired, or agreed to acquire, share capital representing of at least 75 per cent. of the voting rights of Touchstone, IP Group intends to procure the making of an application by Touchstone for cancellation of the trading in Touchstone Shares on AIM

As a result of its size, the Offer constitutes a Class 1 transaction by IP Group for the purposes of the Listing Rules. Accordingly, IP Group will be required to seek the approval of IP Group Shareholders for the Offer at the IP Group General Meeting. The Offer will also be conditional on the approval by IP Group Shareholders of the issue of the New IP Group Shares at the IP Group General Meeting. The IP Group Directors consider the Offer to be in the best interests of IP Group and IP Group Shareholders as a whole and intend to recommend unanimously that IP Group Shareholders vote in favour of all of the resolutions to be proposed at the IP Group General Meeting which will be convened in connection with the Offer

Commenting on the Offer, Alan Aubrey, CEO of IP Group, said:

"We believe that the combination of IP Group and Touchstone Innovations creates an international leader in IP commercialisation and a business that is greater than the sum of the two parts.

IP Group and Touchstone operate in a sector that historically has been funded by a small group of shareholders who have shown continued support and commitment to the innovation industry in the UK. Through our recent capital raise, IP Group has brought new investors into the sector from Australia, Singapore, China and the UK. The Board believes that, with its larger and more diversified portfolio, the Combined Group will be even more attractive not only to current and potential new investors but also to other stakeholders including university partners and talent.

The Board recognises the skills and expertise of the employees of both companies and continues to believe that the Combined Group will lead to greater opportunities for team members on both sides. I look forward to discussing these opportunities and the proposals we have detailed above with IP Group and Touchstone employees at the earliest opportunity.

Our preference has always been to announce an offer with the full support of the Board of Touchstone. We had a number of constructive conversations with the management of Touchstone, in particular around building on the Combined Group. Unfortunately, we could not come to an agreement with the Touchstone Board. We believe that our offer is attractive for the reasons listed above and have decided to make a firm offer directly to the Touchstone shareholders.

We remain open to engagement with the Touchstone Board at any point regarding our Offer."

At 2:12pm:

(LON:IPO) IP Group PLC share price was -1.15p at 132.85p

(LON:IVO) Touchstone Innovations PLC share price was +0.26p at 290.88p