Kip McGrath board rejects Crimson’s $48m takeover offer, Beaton notes shareholder support
Crimson chief executive Jamie Beaton is pushing back after Kip McGrath’s board said it unanimously rejected his firm’s A73c per share takeover offer, and called on shareholders to snub it, too.
“A significant proportion of Kip McGrath’s register has already either indicated an intention to accept Crimson’s offer or transacted on-market at or around the A73 cent offer price,” Crimson chief executive Jamie Beaton told the Herald.
“Ultimately, it is Kip McGrath shareholders who will determine the outcome. The next few weeks will provide a clearer indication of how shareholders view the offer and the value it provides.”
In a notice to the ASX, Kip McGrath said Crimson’s offer was “opportunistic in its timing” amid “an operational reset”.
Shareholders who voted for it would “miss out on the opportunity to participate in any upside if those initiatives are successfully delivered”.
If ultimately successful, Crimson would pay A$40m ($48m) cash to assume control of the ASX-listed international tutoring provider – a 62% premium on its pre-offer price.
The unsolicited offer was said to be funded from Crimson’s cash reserves.
Founder backs bid
Crimson’s July 29 notice said a substantial minority shareholder – Pie Funds Management, which held a 19.25% stake – had agreed pre-bid to accept the offer. The takeover bid would activate once 90% of shareholders agreed to sell to Crimson.
On August 7, Beaton’s firm said founder Kip McGrath (who retired from the board in 2019) had indicated he wanted to sell his remaining stake, taking shareholder support for its bid to around the 40% mark.
But the bid was complicated later the same month as Sydney-based mergers and acquisitions arbitrage fund Harvest Lane Asset Management increased its Kip McGrath holding from 5.8% to 20%.
The AFR, quoting unnamed sources, described it as a “blocking stake”.
Kip McGrath shares closed yesterday at A72c.
The stock was at A45c before the offer.
The firm had a net profit of A$2.5m on A$30.1m revenue last year. It paid a A$0.6m per share dividend. It has A$5.6m in cash and no debt.
Kip McGrath founded the company bearing his name in 1976.
Today the firm has more than 500 tutoring centre franchises around the world and had its shares listed on the ASX in 2003.
Beaton and Crimson have enjoyed a meteoric rise since the then-Auckland teenager founded his educational cramming consultancy in 2013.
Today the company operates internationally, earns hundreds of millions of dollars in annual revenues and is chaired by former Prime Minister Sir John Key.
The play for Kip McGrath is understood to be Crimson’s largest acquisition target to date, after the company has over the past decade rolled up a number of smaller local and international tutoring businesses.
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