KUALA LUMPUR (June 22, 2019): Earlier this week, Paramount Corp stated that it entered into a conditional share sales and purchase agreement with Character First Sdn Bhd and Two Horses for the disposal of majority stakes in three of its subsidiaries involved in pre-tertiary private education business.
The companies are reported to be Paramount Education Sdn Bhd (PESB), Paramount Education (Klang) Sdn Bhd (PEKSB) and Sri KDU Sdn Bhd.
Paramount’s kindergarten to Grade 12 (K-12) education segment is made up of Sri KDU and REAL national and international schools, REAL Kids pre-schools and Cambridge English for Life (CEFL) enrichment centres.
According to a report by The Edge Malaysia, “Two Horses will acquire 69.7% equity interest in PESB for RM134.5 million cash, 80% in PEKSB for RM21 million and 80% in Sri KDU for RM385 million”.
“It is not exiting the education sector, rather, it is choosing to retain a minority position in the business. I believe it could help add value to the purchaser by building new schools for it and allowing the new shareholders to grow its business,” Alpha Real Estate Investment Trust Managers Sdn Bhd chairman Datuk Stewart LaBrooy told the weekly.
Alpha REIT owns the buildings in Kota Damansara that house Sekolah Sri KDU and Sri KDU International School (Alpha bought the assets from Paramount in 2017 for RM165 million).
The weekly also reported that Paramount will distribute RM177 million from the proceeds to shareholders “within six months of the completion of the sales and purchase agreement (SPA) while RM150 million will be used for acquisition of landbank within 24 months of the completion of the SPA”.
The group will also “utilise RM133.65 million to partly repay its borrowings while RM57.85 million is allocated for working capital”.
“The education business is in a very tough environment. There is not much growth in K-12 with over 100 private licences issued,” a source told the weekly.
“There is also the problem of the shortage of staff, with quality teachers moving around a lot. I suspect this is why [Paramount is] selling,” he added.
Meanwhile, Ace EdVenture Education Group founder and group CEO Anne Tham told the publication that: “There are always investors out there who focus on an education portfolio. I have also been approached before.”
“When they buy a school, they have bigger plans to add more value,” she added.
Tham explained that such “investors are often on the lookout for educational institutions that have grown to a certain size”.
Ace EdVenture operates Sri Emas International School, Dwi Emas International School and a private tutoring centre with about 4,000 students.