Deutsche Bank has said it is 'unsurprised' that IP Group PLC (LSE:IPO) rejected a take-private approach from Railpen, its largest shareholder.
The bank, whose analyst Kane Slutzkin rates the stock a 'buy' with a 110p price target, said the non-binding proposal undervalued the company on several counts.
Railpen, which holds 18.4% of the shares, proposed a structure valuing the company at about 69.7p a share.
A further 5p a share could follow through a contingent value right (CVR), a top-up payment that depends on future outcomes.
The headline figure comprises 59p in cash and a variable element worth around 10.7p, linked to the share price of Oxford Nanopore Technologies, a portfolio holding.
Deutsche noted that IP Group shares had re-rated about 40% since Railpen's reference date of 25 March.
Even so, it said, the proposal valued the company 37% below its last reported net asset value of 110p a share, a measure of the worth of its holdings.
The bank also flagged that the offer was not a clean all-cash deal.
Shareholders would instead be exposed to the variable ONT component and to a separate contingent payment tied to Istesso, another portfolio company.
Deutsche Bank added that the approach appeared to attribute little value to the optionality in IP Group's portfolio.
It singled out the holding's interest in a Pfizer obesity drug royalty as a notable example.
Against that backdrop, the board's rejection was unsurprising, the bank said.
Railpen now faces a "put up or shut up" deadline of 20 July, by which it must either announce a firm intention to bid or walk away.
Shares in IP, the London-listed investor that backs and commercialises science and technology businesses, were changing hands for 65.2p.
