PE investors move to liquidate Ambow, call for CEO to resign

Fellow investors Baring Private Equity Asia and Macquarie came out in support of the petition last week and three KPMG partners have now been appointed joint provisional liquidators by the Grand Court of the Cayman Islands, Ambow's jurisdiction of incorporation.

This comes less than three months after Baring submitted a $108 million take-private bid for Ambow. It withdrew the offer one week later after the resignation of three independent directors and the company's auditor, PricewaterhouseCoopers (PwC). 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.

Avenue Capital said in its petition that Dr. Jin Huang, Ambow's CEO and chairman, was abusing her powers and employing obstructionist tactics designed to entrench her control of the company. Huang's behavior had, it claimed, oppressed shareholders' interests and eroded shareholder value. However, it did express optimism regarding Ambow's future prospects should these concerns be resolved through Huang's resignation.

Avenue owns 21.6% of Ambow, while Baring and Macquarie hold 10% and 7.9%, respectively. Huang has a 10.8% stake.

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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• Topics
• Greater China
• Consumer
• Regulation
• China
• regulation
• Avenue Capital Group
• Baring Private Equity Asia
• Macquarie Funds Group