AdvTech AGM: Curro’s R6bn bid rejected

Published Jul 29, 2015

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Johannesburg - Private education group AdvTech’s board and shareholders gave the strongest indication at their annual general meeting (AGM) that an unsolicited R6 billion bid by Curro Holdings would not be entertained, in part because it would interfere with a R3bn expansion plan on the cards.

AdvTech chairman Chris Boulle and chief executive Frank Thompson reiterated that Curro had not made an offer to be taken seriously by shareholders but had instead made a “scheme of arrangements”, a legal format that requires the AdvTech board to first approve the terms of the proposals and then propose this to its own shareholders.

According to Thompson, AdvTech’s two biggest shareholders, Coronation Fund Managers and Kagiso Holdings, which favoured the Curro deal, were overwhelmingly outvoted by other shareholders and had “voted against various resolutions at the AGM”.

Other interest

“The AdvTech board and shareholders applied their minds to this approach and we decided we would not be putting the matter to shareholders. Curro is free to make an offer to shareholders,” Thompson said, leaving the possibility of a hostile takeover open.

Thompson told Bloomberg the group had attracted “quite a lot of interest”, mostly in the form of expressions of interest amid Curro’s takeover bid.

“Our offer is still open until the close of business today. If same is not accepted, Curro will consider its options available and will revert to its shareholders in due course,” Curro said in a statement.

Thompson said there were many reasons for the decision to reject Curro’s proposal.

These included concerns about the company’s reputation and brands, differences in culture of the two companies and whether Curro could continue to fund AdvTech’s growth plans, Boulle said.

There was nothing to stop Curro from making an offer directly to shareholders, he said.

Should Curro succeed, it would not want to change the business, said PSG Capital managing director Johan Holtzhausen. PSG holds about 57 percent of Curro’s shares.

“It would be silly for us to pay a premium and then change values, ethos and brands,” he said at the meeting.

Any offer for AdvTech should be firm and unconditional and “underpinned by a substantial cash element,” Boulle said at the AGM.

Both Kagiso and Coronation have said they were disappointed the board did not let shareholders vote on Curro’s proposal to buy AdvTech.

The issues raised by the board that did not relate to the offer price were “relevant but they are manageable”, Kagiso representative Simon Anderssen said at the meeting.

Coronation was “still digesting the results of the AGM and the process going forward”, the company said.

AdvTech’s board had committed to continue to engage with Kagiso and Coronation “in a proactive manner to try and resolve their concerns”, Boulle said after reading out the results of the vote at the meeting.

Several parents, whose children attend AdvTech schools, expressed support for the board at the AGM and concern that a Curro takeover would not be positive for the company.

Debt worries

Boulle said in a statement that AdvTech had a R3bn rolling capital expenditure plan that might require further capital.

He said Curro was much more leveraged than AdvTech and that its current debt levels might make raising further debt difficult.

He said the board was not convinced the proposal would ensure support for AdvTech’s business model and growth strategy.

Boulle said Curro’s unacceptable pre-conditions of the scheme of arrangement would have prevented AdvTech from following its R3bn growth strategy for up to a year by preventing AdvTech from raising new capital or making acquisitions.

“AdvTech would be hobbled, Curro would get a competitor’s commercially confidential information and could continue with its own expansion strategy,” Boulle said.

Curro shares were unchanged at R34.20 on the JSE yesterday, while AdvTech shares rose 0.08 percent to R12.30.

* Additional reporting by Bloomberg

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