Marc Hasenfuss: Market Watch

AdvTech, remembering that the snags in the tertiary business unit have been sorted out and that newer schools are also chipping in, came in lower than 55c/share for the full financial year. Despite the improved profit performance, I’m led to believe certain key AdvTech shareholders — perhaps miffed that the company’s conservative approach may have allowed growth opportunities to slip by — may well favour an advance by Curro. But with the latest trading update to hand I wonder whether all AdvTech shareholders are going to respond enthusiastically to a buyout offer, especially if it entails swapping out for premium priced shares in Curro. I can’t deny Curro is more exciting, but AdvTech shareholders would need to be convinced an enlarged private education venture, merging two vastly different corporate cultures, is capable of growing earnings rapidly year after year.

It’s possible Curro — backed by PSG (which in turn has Steinhoff International as a shareholder of reference) — can make a cash and scrip offer. But what is the price tag that pencils in the profit potential of a revamped AdvTech? R14/share? R15/share?

Though shareholders — with AdvTech’s share price at a record high — can’t be unhappy with developments, what if a rival bidder emerged? I could well imagine Curro’s rumoured advance, especially if AdvTech’s board is not accommodating, might prompt other contenders to have a crack at AdvTech as well. A key question will nag, though. How much potential upside could be given away if a re-energised AdvTech is tucked into another private education venture? And another pertinent question, presuming AdvTech shareholders get offered a chance to participate in a larger or new private education entity, is how much more risk will be assumed on growth strategy. At present, AdvTech looks a fairly secure bet to chalk up sound profit growth and a decent yield for the medium term.