PE-backed Ambow Education seeks return to US main board

The company, which has spent the last few years trading on the over-the-counter market, has yet to establish the size and pricing for the offering. According to a filing, Baring Private Equity Asia holds 8.44%, although its voting power is smaller due to a dual-class share structure that favors Jin Huang, Ambow’s CEO and chairman.

The private equity firm, which agreed to invest $50 million in Ambow in 2011, sought to privatize the business in early 2013, saying it faced challenges that could be better addressed without the pressures of being publicly listed. The offer was withdrawn a fortnight later following the resignation of four of Ambow’s independent directors and its auditor.

The problems stemmed from allegations made in 2012 by a former employee of financial impropriety regarding the acquisition of a training school in 2008. PwC was investigating the matter but withdrew due to concerns that it didn’t have sufficient resources or time, and that the presence of existing management could restrict the scope of inquiries.

A court appointed liquidators to assume control of Ambow in June 2013 following a petition filed by Avenue Capital, which at the time held a 21.6% stake in the business. Baring and Macquarie, another shareholder, came out in support of the petition. It said that Huang was abusing her powers and employing obstructionist tactics designed to entrench her control of the company.

Huang refused to step down and a committee comprising creditors and shareholders – formed by the joint provisional liquidators – ultimately concluded there was insufficient evidence to substantiate the allegations of inappropriate conduct. However, the report advised that the company’s corporate governance structure needed improvement. The board was subsequently reconstituted and various assets were divested.

Ambow conducted a restructuring in May 2014 by taking a loan facility from China Education Investment Holding (CEIHL) that would convert into equity. CEIHL then assigned a portion of its commitments to Baring and SummitView Capital. These loans have now been converted into equity. CEIHL has a 37.48% stake in Ambow, while SummitView holds 7.17%.

As of March, the company had 41 learning centers and schools, including three directly-operated K-12 schools, 10 tutoring centers, 18 training offices, nine career enhancement centers, and one career enhancement campus. The K-12 schools, which employ 1,100 full-time staff and support more than 14,000 students, accounted for more than two-thirds of total revenue in 2016.  

Revenue came to RMB412 million ($62.6 million) 2016, up from RMB395.7 million the previous year. The company posted a net loss of RMB37 million, compared to a profit of RMB64.7 million in 2015. However, its position remains stronger than in 2014, when losses amounted to RMB1.07 billion.

In 2011, a year after it first listed in the US, Ambow had 150 tutoring centers, five K-12 schools, 25 career enhancement centers, two career enhancement campuses and one college. Revenue reached RMB1.3 billion in 2011, having more than doubled over the previous two years, while net income came to RMB16.2 million, down from RMB211.7 million in 2010.

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• Topics
• Greater China
• IPO
• Consumer
• China
• Baring Private Equity Asia
• Education