Private education group Advtech has nailed its colours to the mast, saying it is business as usual after it rejected a takeover proposal from PSG-controlled rival Curro Holdings.

With a more than usual turnout at the Advtech’s annual general meeting on Tuesday, the company said it will now focus on growing company operations and building its relationships with shareholders.

No doubt the shareholders in focus are Kagiso Asset Management and Coronation Fund Managers, which expressed interest in Curro’s offer.

The asset management companies, which have a collective 33% stake in company, indicated that they would accept an offer from Curro of scrip and cash priced at R13/share.

The offer would be based on a share swap ratio of 2,59 Advtech shares for every Curro security, with Curro shares valued at R33,65 on 22 July. The deal would value Advtech at R6bn.

After initially engaging in talks, Advtech lost interest in the deal, with the board refusing to pursue discussions with Curro or put the offer to shareholders saying it was not in the best interest in the company.

Even if Curro sweetened the proposal, management was emphatic that the proposal would still be rejected.

The company’s incoming chairman, Chris Boulle, said there were no synergies between the two companies on culture or management style.

Advtech owns high-end schools, which include Crawford College and Trinityhouse and a tertiary education operation, while Curro owns affordable private schools.

Boulle added that Advtech’s earnings are three times more than that of Curro, intimating that it would not be a merger of equals. “We doubt that shareholders will have appetite for Curro scrip,” he said.

Much of the work will be restoring relationships with Kagiso Asset Managers and Coronation. As Advtech CEO Frank Thompson puts it: “I had extensive discussions with Coronation and Kagiso. In that meeting I invited them to discuss their future shareholding in the company. We are not altogether happy that Coronation finds itself in a camp opposed to a view of the board.”

However, “we would also like to engage with them to get a better practical relationship as the largest single shareholder. We are committed to that,” Thompson said.

Kagiso Asset Managers has been emphatically unhappy that the Advtech board did not refer Curro’s to shareholders for a vote.

“The ultimate goal of this [the proposal] would have been the public announcement of the terms of the deal in order to allow all shareholders to evaluate the offer independently… We are therefore disappointed that the board of Advtech has decided not to refer Curro’s offer to all shareholders,” said the institution’s analyst, Simon Anderssen.

Anderssen said the institution will continue to engage with the management of Advtech to “achieve the best outcome for our clients.”

Curro’s latest offer lapses on Tuesday and in a terse statement PSG says if it is not accepted by shareholders, then “Curro will consider its options available and will revert to its shareholders in due course”.

For now, the collapse in talks leaves the relationship between the two JSE-listed education groups “hostile”. And this, Thompson said, puts constraints on the kind of future discussions Curro and Advtech can have.

Moving forward
If the proposal had received the green light, Advtech foresaw Curro making several changes to the company. Boulle said Curro, with a market capitalisation of R12bn, would implement cost-cutting measures, which would impact the reputation of the group. He further noted that the deal would prevent Advtech from pursuing its acquisitions.

Advtech, which has a market capitalisation of about R5,5bn, said it has a R3bn capital expenditure programme which will see it make more acquisitions in South Africa and further into the continent.

During Curro’s advances, Thompson says it had received other expressions of interest in Advtech. “Advtech is quite sexy in terms of its investment potential. We received formal and informal expressions of interest in the company. None of them have progressed to the point that we need to share something with shareholders,” he said.

The Curro proposal also caused a delay in appointing a permanent CEO after Leslie Maasdorp abruptly parted ways with the group. Maasdorp’s departure saw Thompson be roped in from retirement to run the show.

“We are busy looking, we have interviewed interested candidates and we are progressing,” said Boulle.

A total of 73 shareholders attended the AGM, together with parents and educators. On the agenda were concerns that Curro would not maintain Advtech’s tertiary operations if the deal was approved.

Also, Curro’s alleged racial segregation at one of its school raised temperatures among parents who warned that the approval of the deal would see them searching for new schools for their children.