Johannesburg - A takeover battle to create a $1.5 billion private education giant in South Africa is pitting shareholders against parents and exposing tensions over race, language and ethnicity two decades after the end of apartheid.
Although education stirs emotions in any country, it is particularly true in South Africa, where access to schooling and the language of tuition were used for decades as tools of oppression by the white-minority government that ended in 1994.
However, since then a failure to turn round the state system has convinced millions of parents - of all races - to go private, creating fertile ground for school companies such as Curro Holdings.
The firm, 52 percent-owned by investment company PSG Group , has seen its share price rise seven-fold since its 2011 float as it has tapped into growing demand for affordable private schools. It plans to double its campuses to 80 by 2020.
Based in the conservative and largely Afrikaans-speaking university town of Stellenbosch, PSG has enjoyed huge success by betting on high-growth companies challenging entrenched actors in the post-apartheid economy.
Its biggest play is Capitec, a financial upstart whose inroads against South Africa's four big banks have elicited comparisons with US investor Warren Buffett for PSG chairman Jannie Mouton, often referred to as the “Boere Buffett” in Afrikaans newspapers.
However, PSG's latest venture - an attempted takeover by Curro of upmarket schools rival Advtech, a Johannesburg-based company run by English-speaking South Africans - is not generating such glowing headlines.
Advtech's board last week rejected Curro's R6 billion ($480 million) buyout bid, saying it was not in the interest of the company, parents or children attending top-end schools such as Crawford College and Trinityhouse.
School race
At an Advtech AGM this week, two parents said they would pull their children out of Advtech schools in the event of a takeover, driven by concerns Curro might tamper with Advtech's ethos, including its approach to racial integration.
At the top of their minds were two recent incidents in which Curro teachers were accused of segregating children along racial lines - breaching all the ideals of the egalitarian 'Rainbow Nation' espoused by Desmond Tutu and Nelson Mandela.
In one instance, a Curro school principal near Pretoria was dismissed after a video appearing to show children being separated according to race on a field trip.
Contacted by Reuters for this story, a spokesman for Curro said the incidents were isolated and that racial segregation is not part of its ethos. He also said the company stood by statements made at the time saying that the splits were made along practical, linguistic lines.
But the footage of mostly white, Afrikaans-speaking children being separated from their mostly black, English-speaking friends struck a nerve, including with the government.
Some Advtech parents are worried.
“It concerns us greatly. Curro has only received negative publicity,” said Audrey Gray, a parent at one of Advtech's Trinityhouse schools.
Underscoring the depth of the challenge to Curro's bid, Advtech chief executive Frank Thompson told the meeting his “non-shareholding stakeholders” - a clear reference to Advtech's parent body - would want a powerful say in any takeover.
He also said his company was in discussions with other investors and companies interested in “partnership”.
Africa beckons
Curro, which has made a R13 per share cash and share offer, remained adamant that it would not tinker with schools in Advtech's portfolio.
“From an acquirer's perspective, it would be absolutely silly to pay a premium and then change the brands or ethos of the business you are acquiring,” said Johan Holtzhausen, one of PSG's in-house advisers. “We indicated this to Mr Thompson and the Advtech board from day one,” he told Reuters.
At stake is more than just classrooms in South Africa.
Advtech touted the opening of its first school in neighbouring Botswana this year as the start of a push into a continent of a billion people with a growing middle-class ready to splash out on education.
In his overtures to Advtech, Curro chief executive Chris van der Merwe echoed such sentiments, with references to a united “continental champion” in the field of schooling.
But first the two sides must square their domestic differences, some of which are seated in the corporate and social divisions that remain in post-apartheid South Africa.
Even though his two largest shareholders, Coronation and Kagiso Asset Management, who together hold more than a third of shares, back the deal, Advtech boss Thompson described relations with Curro as “hostile” and “a blend of cultures that I think is problematic”.
Reuters
Update: Post publication Curro told shareholders its bid had expired and they no longer needed to be cautious when trading shares.