KUALA LUMPUR (Dec 5): Loss-making Asiamet Education Group Bhd plans to buy CUCMS Education Sdn Bhd (CESB) — operator of the Cyberjaya University College of Medical Sciences in Cyberjaya, Selangor — from ACE Market-listed SMRT Holdings Bhd and its wholly-owned subsidiary SMR Education Sdn Bhd (SESB) for RM166 million, as part of plans to turn itself around and grow its business.
The proposed acquisition will be satisfied via the issuance of 830 million Asiamet shares at an issue price of 20 sen each.
In a filing with Bursa Malaysia today, Asiamet said the issue price is equivalent to the closing market price of Asiamet shares on Dec 2, 2016, being the last full trading day prior to the date of this announcement, of 20 sen.
SMRT, which is controlled by its chairman Tan Sri Dr Palaniappan Ramanathan Chettiar, is currently an indirect major shareholder of Asiamet via its wholly-owned subsidiary, Strategic Ambience Sdn Bhd.
Asiamet said it has entered into a conditional share sale agreement with SMRT and SESB to buy the entire 20 million shares in CESB. Apart from the Cyberjaya University College of Medical Sciences, CESB also has two dormant subsidiaries, namely Fusion Bio-Life Sciences Sdn Bhd and CUCMS Edutech Sdn Bhd.
Under the proposed acquisition, Asiamet will acquire 14 million CESB shares or a 70% equity interest from SESB and another 6 million CESB shares or a 30% stake from SMRT, for a combined RM166 million.
The original cost of investment in CESB by both SESB and SMRT was RM46.83 million.
Following completion of the proposed acquisition, CESB will become a wholly-owned subsidiary of Asiamet.
SESB in turn will hold more than 33% of the enlarged issued share capital of Asiamet. Accordingly, SESB will be obliged to undertake a mandatory take-over offer for all remaining Asiamet shares not already owned by SESB and its parties acting in concert, after the proposed acquisition.
As SESB does not have any intention to undertake the mandatory take-over offer, SESB intends to seek an exemption from the Securities Commission Malaysia, said Asiamet.
The proposed acquisition comes with a profit guarantee, where SMRT and SESB jointly undertake and covenant with, and guarantee to Asiamet that the aggregate audited net profit of CESB Group for the financial years ending Dec 31, 2017, 2018 and 2019 will be RM24.84 million, based on RM7.53 million (being the net profit of the group for FY15) multiplied by 1.1.
"Accordingly, the vendors guarantee to (Asiamet is) that CESB Group shall achieve an average yearly net profit of at least RM8.28 million for each of FY17 to FY19," said Asiamet.
"If the cumulative net profit of CESB Group for the financial years FY17 to FY19 (falls) short of the aggregate profit guarantee, the vendors shall pay the relevant sums to Asiamet within 30 days from the date of receipt of the demand notice," it added.
Asiamet is also proposing to implement an internal reorganisation exercise after the completion of the proposed acquisition, where it will dispose of its entire equity interest in CESB, Valencia Education Group Sdn Bhd, Asiamet (KK) Sdn Bhd, Asiamet (Kuching) Sdn Bhd and Asiamet (KB) Sdn Bhd to a NewCo, with SMRT at the helm.
"The proposed share exchange entails the exchange of the entire enlarged issued share capital of Asiamet for NewCo Shares, at an entitlement date to be determined on the basis of one NewCo share for every one Asiamet share. Upon completion of the (exercise), the shareholders of Asiamet will become shareholders of NewCo, and Asiamet will become a wholly-owned subsidiary of the NewCo," said Asiamet.
"Upon completion of the proposed share exchange, the NewCo will be the new holding company of Asiamet Group. The NewCo will assume the listing status of Asiamet on the Main Market of Bursa Malaysia," it added.
According to Asiamet, the Cyberjaya University College of Medical Sciences' current main campus has a capacity to accommodate 3,500 students. However, there are plans to relocate CUCMS to a new purpose-built campus in Cyberjaya in 2018 that would facilitate an increase in capacity to about 8,000 students.
"Cyberjaya University College of Medical Sciences offers 22 courses currently. The MBBS course, which is regulated by the Malaysian Medical Council and is bound by the MQA Accreditation, currently has an enrolment of about 700 students, while the Bachelor of Pharmacy (Honours) course which is regulated by the Pharmacy Board of the Health Ministry has an enrolment of about 450 students," said Asiamet.
The proposed acquisition is subject to approval of Asiamet and SMRT shareholders, at a separate extraordinary general meeting to be convened.
Barring unforeseen circumstances, Asiamet said the proposals are expected to be completed by the second quarter of 2017.
Asiamet shares closed unchanged at 20 sen today, with 288,100 shares traded for a market capitalisation of RM75.22 million. SMRT settled at 21 sen, up 2.5 sen or 13.51%, with a market capitalisation of RM60.93 million.