Paramount Corporation Berhad (Paramount) was recently granted approval by the Ministry of Education for the disposal of controlling equity interests in its wholly-owned subsidiaries Paramount Education Sdn Bhd (PESB), Paramount Education (Klang) Sdn Bhd (PEKSB) and Sri KDU Sdn Bhd (Sri KDU).
Paramount sold off its controlling shares in the three companies to Prestigion Education Sdn Bhd (Prestigion), formerly known as Two Horses Capital Sdn Bhd (THC),for an indicative total cash consideration of RM540.5 million.
The approval from the Ministry of Education was the last precedent to the Sales & Purchase Agreement (SPA).
The SPA was entered by Paramount with Prestigion in June 2019 for the disposal of 130,339,000 (69.7%) ordinary shares in PESB for RM134.5 million, 800,000 (80%) ordinary shares in PEKSB for RM21 million and 1,800,000 (80%) ordinary shares in Sri KDU for RM385 million. PESB also holds 66% equity interest in R.E.A.L Education Group Sdn Bhd (REAL Education) whilst the balance 34% equity interest is held by Character First Sdn Bhd (CFSB). Pursuant to the terms of the SPA, CFSB shall dispose of all its 34% equity in REAL Education to THC.
Paramount’s utilisation of the proceeds from the disposal of controlling equity interests in PESB, PEKSB and Sri KDU will go to the acquisition of land, repayment of bank borrowings, working capital as well as estimated expenses in relations to the proposed disposal.
According to Paramount’s filing to Bursa on the proposed disposal, this exercise will enable the group to monetise and unlock the value of its investments in the Paramount Pre-Tertiary Group at an attractive valuation which is comparable to regional education service providers operating in developed market.
“We are also able to realise pro forma gain on disposal of approximately RM487.8 million, which will translate into an improvement in earnings per share of the Company by RM1.10 per share. This exercise will also focus the group’s resources on driving growth for its core business of property development and to explore new business opportunities, while at the same time, retaining an effective minority stake of 20% in the Paramount Pre-Tertiary Group’s business. This would also allow the group to participate in the growth of the Paramount Pre-Tertiary Group and raise the required funds for working capital purposes as well as to partially repay Paramount Group’s borrowings. This in turn is expected to improve Paramount Group’s gearing level and cash flow due to the annual interest savings of approximately RM6.9 million, of which the Group will be able to utilise for working capital.”
The filing report adds, “This disposal to Prestigion will also enhance brand visibility of Paramount’s Pre-Tertiary Group regionally as Prestigion’s shareholders, Yang Amat Mulia Tunku Ali Redhauddin ibni Tunku Muhriz (Tunku Ali) and Ganendran Sarvananthan have extensive regional business networks.”
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