Baring PE Asia abandons Ambow Education take-private
Baring Private Equity Asia (BPEA) has abandoned its $108 million take-private bid for Chinese education provider Ambow Education Holding, citing the resignation of four of the New York-listed company’s independent directors and its auditors in the 10 days since the offer was submitted.
The private equity firm said in a regulatory filing that it remains willing to consider potential transactions with Ambow, including an acquisition of all or part of the company, once the current situation is resolved.
On March 15, BPEA offered to pay $1.46 for each American Depository Share, which represented a 44.5% premium over the previous day's closing price. Having initially jumped 58% on news of the private equity firm's interest, Ambow's stock plummeted nearly 20% on Friday to $0.95 before being suspended from trading.
This came after the company announced that PricewaterhouseCoopers' (PwC) China subsidiary had resigned as auditor. Audit committee counsel Fenwick & West, which was investigating allegations made last year by a former employee of financial impropriety in connection with the acquisition of a training school in 2008, also stepped down.
In its resignation letter, PwC cited concerns that the investigation may not be given the necessary resources and time and that the presence of existing management may restrict the scope of inquiries. The accounting firm added that it has drawn no conclusions in connection with the investigation, which is ongoing.
When submitting its initial offer, BPEA noted that Ambow was facing difficult challenges that could be better addressed as a private company without the pressures of being publicly listed. The private equity firm currently controls 10% of the company, having invested $50 million in October 2011.
Ambow's primary business is providing tutoring services and test preparation - online and offline - to Chinese students sitting high school and university entrance examinations. It also offers career enhancement training to recent graduates and those in further education.
As of December 2011, the company had 150 tutoring centers, five K-12 schools, 25 career enhancement centers, two career enhancement campuses and one college. Net income came to RMB16.2 million ($2.6 million) in 2011, down from RMB211.7 million in 2010 and RMB138 million in 2009. Revenues more than doubled over the two-year period to RMB1.3 billion but operating expenses jumped 166% to RMB748.2 million.
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