Marc Hasenfuss: Market Watch

believe, could at least part fund a cash settlement component by increasing its corporate bond and through a rights issue of up to R1,5bn. Five successful rights issues in five years suggests Curro should not battle to double the R750m it raised last time.

Of course, issuing a large chunk — let’s assume up to 75% of the settlement was via new shares — would present its own problems in that PSG would need to dilute its stake in Curro markedly. Recalling comments made at the recent PSG AGM, that might still be preferable to PSG having to place shares for cash to follow its rights if Curro embarked on a massive rights issue to settle up the AdvTech transaction. At the AGM, PSG chairman Jannie Mouton said PSG’s previous efforts to place paper had proved costly as the share price had performed so strongly in recent years.

What might throw a different shade on the deal is if Curro acquired only AdvTech’s private school assets: Crawford Colleges, Trinity Colleges, Maravest, Centurus and Abbotts. Of course, AdvTech’s board and shareholders might insist on an all-ornothing transaction, and not allow Curro to leave out the tertiary education operations (most notably Rosebank College, Varsity College and Vega) and small personnel services operations.

AdvTech, of course, could remain a listed company with its sizeable (and reinvigorated) tertiary offering and personnel placement operations. But it would lose much of its allure and underpin sans the dependable private school assets. A “schools-only” deal would have a more manageable acquisition price, though the effective earnings multiple placed on the schools assets would be fascinating to gauge in view of Curro’s heady market rating.

If Curro had to acquire all of AdvTech, would the wellconnected deal-making fraternity at PSG relish the challenge of having to sell off the tertiary education and personnel assets? This might be a hassle, but not a deal-breaker.