KUALA LUMPUR (June 20, 2019): Paramount Corp Bhd is to divest its controlling stake in its K-12 education business for an indicative RM540.5 million in cash, and intends to distribute RM177 million from proceeds of the sale as special cash dividend.
In a bourse filing today, the group said it was selling majority stakes in Paramount Education Sdn Bhd (PESB), Paramount Education (Klang) Sdn Bhd (PEKSB) and Sri KDU Sdn Bhd (Sri KDU) to Character First Sdn Bhd and Two Horses Capital Sdn Bhd (THC).
In particular, Paramount will be selling 69.7% or 130.34 million ordinary shares in PESB, 80% or 800,000 shares in PEKSB and 80% or 1.8 million shares in Sri KDU.
The sale is expected to result in a pro forma gain of RM487.81 million — improving earnings per share (EPS) by RM1.10, with the group distributing RM177 million of the proceeds as dividends to shareholders within six months of the agreement.
RM150 million will be used to acquire new property for its landbank within two years of the agreement; RM133.65 million will be used to repay borrowings, within six months of the agreement; RM57.85 million will be used as working capital, to be utilised within a year; and RM22 million will be for expenses associated with the sale, to be paid within three months of the agreement.
The sale is subject to approval from the Ministry of Education (MoE) and the shareholders.
Paramount’s K-12 education businesses are composed of the Sri KDU and REAL national and international schools, REAL Kids pre-schools, and Cambridge English for Life (CEFL) enrichment centres.
In a separate statement, Paramount group chief executive officer Jeffrey Chew said the move allows the group to unlock the value of its education business, and the cash raised from the sale will be used as working capital, to grow its property development business’ land bank and be distributed to shareholders in the form of dividends.
Chew noted that Paramount will still maintain a minority stake with board representation in the Sri KDU Schools and the REAL Education Group.
In addition, the move will also see Paramount’s property development and education business as stand-alone businesses, allowing for the group to grow its property development division.
He added that the group’s aim has always been to strengthen its businesses locally with regional expansion in sight.
“To do so, we believe the most efficient way is to work with a strategic partner with the experience, network and financial capacity,” said Chew.
Rothschild & Co is the sole financial advisor to the Paramount’s board for the sale. Meanwhile RHB Investment Bank Bhd is the sole principal advisor.
Credit Suisse is a buyside advisor and Malayan Banking Bhd is the co-advisor to TPG Capital Asia, which is the Asian arm for global alternative asset firm TPG.
TPG Capital will provide financing to THC, as well as strategic and operational support.
THC is helmed by TPG Capital Asia senior advisor Tunku Ali Redhauddin Tuanku Muhriz and TPG Capital Asia managing partner Ganen Sarvnanthan.
Tunku Ali was a key figure in the establishment of UK independent school Malborough College’s Malaysian campus, while also being the founding trustee and chairman for non-profit Teach for Malaysia.
Ganen, who was former Khazanah Nasional Bhd head of investments, was a key player in TPG Capital Asia’s investment in Vietnam Australian International School (VAS) in Ho Chi Minh City, Vietnam.
“We are happy to embark on this journey with Paramount, the largest K-12 education group in Malaysia. We strongly believe in both the group and industry’s growth potential in Malaysia and abroad,” said Tunku Ali in the statement.
At 10:25am, shares in Paramount rose 6.25% or 13 sen to RM2.21 — with 772,000 shares traded — giving it a market capitalisation of RM897.02 million.