Navitas chairman Tracey Horton, who was criticised at the annual meeting late last year for not accepting the previous offer, said: “There is a fair way to go to get a completed transaction but the board is comfortable to recommend this proposal given the price and terms that are now on the table.
“The new proposal provides the potential for Rod Jones and AustralianSuper to support a superior proposal if BGH chose not to match.”
It is understood BGH wants to focus on the university partnership business of the company, in which Navitas receives a fee from students to prepare them to enter first-year courses at specific universities.
The company has 18 university partnerships in Australia, 10 in North America and nine in Europe. Between them they bring in $931 million in revenue.
Sources familiar with BGH Capital predicted that, as the new owner, it would increase the volume of students in its individual university partnerships and increase the number university partnerships where possible. Two partnerships were signed up in 2018 and another five are due by 2020
Analyst Simon Mawhinney from Allan Gray Australia, which owns 7.5 per cent of the stock, said the revised offer was “favourable but a surprise”, given the previous offer was “reasonable”, despite being rejected by the board.
“I’m not sure what BGH has planned, but clearly the Navitas’ growth prospects are the ones BGH think are likely to be achieved. It’s a very reasonable price,” he said.
Asked whether he thought BGH had offered too much to lock in a deal, Mr Mawhinney said it was not uncommon for a buyer to find 5 per cent or 6 per cent more for an asset “if they like it”.
“But it’s unlikely to tout an aquisition and go into due diligence and then see something they were not already aware of,” he said.
Last year Navitas forecast EBITDA of $200 million by 2021 compared with EBITDA (before one-off expenses) of $142 million in 2018.
Co-founder of the company and holder of 6 per cent of the stock, Peter Larsen, said the revised offer was “an excellent outcome” and, assuming it passed due diligence, Navitas would “grow and prosper” as a private international education company.
Analyst Philip Pepe, from Blue Ocean Equities, predicted most investors would accept the bid, especially with the presence of Mr Jones, a former chief executive, in the bidding consortium.
He predicted BGH Capital would focus on the international university student market and said the company could afford to “move more aggressively into Europe”.
Negotiations for the deal had been under way over the Christmas-new year period with Navitas pushing to get rid of the conditionals clause.
The Navitas board was criticised at the AGM late last year for holding out against the first BGH bid as it struggled to extract more value, with Ms Horton avoiding a vote against her re-election only when shareholder AustralianSuper declined to vote.
Navitas has granted BGH exclusive due diligence from January 15 to February 18. However, it has negotiated the right to grant due diligence to any “superior offer” after January 29, should one emerge.