Curro backs down from Advtech

Curro drops its bid for Advtech.

Curro drops its bid for Advtech.

Published Jul 29, 2015

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Johannesburg - Curro has backed down from its R6 billion offer to buy out Advtech, a bid that would have created a private education giant in SA.

In a statement to shareholders this afternoon, the private education company - which has previously come under fire for racially segregating school children - said it was withdrawing its cautionary announcement.

The two companies have been locked in a heated battle over Curro’s R13 and shares offer for Advtech, which Advtech had initially spurned without taking the bid to shareholders.

Yesterday, about half of Advtech’s shareholders rejected the unsolicited bid, arguing it would interfere with a R3 billion expansion plan on the cards.

AdvTech chairman Chris Boulle and CEO Frank Thompson reiterated 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”.

“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.

However, Curro has now said its bid was no longer on the table after expiring at 5pm last night.

Hitting back

It says in a statement that it had negotiated in good faith believing that the two companies could create a new sizeable mid-cap company with benefits to all stakeholders. “A belief that we thought was shared by Advtech management.”

In a swipe at Advtech and parents who had been concerned by Curro’s tainted past after it was accused of racially segregating children, Curro said it and Advtech’s management had agreed “upfront” that Advtech’s ethos, values and brands would be retained.

However, Thompson has said there were many reasons for rejecting 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.

Curro also hinted to its shareholders that all was not as it seemed with Advtech’s books. It noted its offer was conditional on a limited due diligence investigation because of Advtech’s “complex” operating model. It also noted Advtech’s financial reporting needs to be unpacked for Curro to fully understand its underlying business models as well as performance.

“It made several acquisitions that only became effective after 1 January 2015 and therefore have not been satisfactorily disclosed in the publicly available financial information.”

In addition, Curro said it was led to believe that some of Advtech schools operate under lease agreements which could have a significant negative impact on a school business in the future, information it says was not sufficiently reported on in Advtech's financials.

However, Boulle has said Curro’s unacceptable pre-conditions of the scheme of arrangement would have prevented Advtech from following its R3 billion 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.

IOL

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