Singapore-listed Raffles Education Corp has entered into two agreements to acquire up to 50 per cent in Raffles College of Higher Education (RKL), a provider of training programmes and courses in design and management. Currently, its equity interest amounts to 20 per cent of RKL.
The aggregate consideration amounts to RM8,381,000.00 ($2.02 million) and is funded by a combination of internal resources and external funding, according to details of a stock exchange filing.
According to the filing, the first agreement is a share purchase agreement with Doris Chung Gim Lian to purchase 464,000 ordinary shares in the capital of Raffles College of Higher Education Sdn. Bhd. (RKL), which represents 29 per cent of the issued share capital in RKL. Chung is the wife of Chew Hua Seng, CEO of Raffles Education Corporation.
The second agreement is a a conditional share purchase agreement to purchase 336,000 RKL Shares, which represents 21 per cent of the issued share capital in RKL. The completion of the second tranche acquisition is subject to the regulatory approval of the Ministry of Education of Malaysia
Prior to the first acquisition agreement, Raffled Education owned 20 per cent of the issued share capital in RKL. Following the completion of the first acquisition, Raffles Education will be registered as the holder of an additional 464,000 RKL shares, bringing its total shareholding in RKL to a total of 784,000 Shares, representing 49 per cent of RKL’s issued share capital.
Raffles Education explains the acquisition as enabling the firm to “benefit from the profitable operations of RKL, where it is currently not expected for the Company to fund the operations of RKL” and aligns with long-term plans to access the growing educational industry in Malaysia. The purchase will see Raffles Education attain a controlling interest in RKL, which will see it consolidated into the financials of Raffles Education Corporation and its subsidiaries.
In a third party valuation exercise, independent advisory firm RSM Strategic Business Advisors valued RKL at between RM28.9 million and RM36.1 million as at 1 July 2015, The valuation was based on the income approach, using a discounted cash flow analysis as the primary valuation method, and the market approach using the capitalisation of earning method.