January 15, 2019 / 1:04 AM / a month ago

Australia's Navitas backs revised $1.5 billion takeover offer

SYDNEY (Reuters) - Australian adult education provider Navitas Ltd (NVT.AX) on Tuesday said it will back a sweetened buyout proposal worth A$2.09 billion ($1.50 billion) from its founder and a private equity firm, sending its shares to more than a two-year high.

Navitas late last year rejected an indicative offer from founder Rob Jones and private equity company BGH - the new firm of TPG Capital Management LP’s [TPG.UL] former Asia boss Ben Gray - worth A$5.50 a share, saying the bid undervalued it.

Three months on, the consortium raised its price by nearly 6 percent, and Navitas said its directors plan to unanimously recommend the improved offer.

The offer, a 18.9 percent premium to the share price close on Monday, is likely to be embraced by shareholders, some of whom vented their frustration at the board of Navitas at its annual meeting in October for rejecting the original offer.

Shares in Navitas rose as much as 10 percent to hit A$5.55 in morning trade, their highest since Aug. 4, 2016. That was still below the upgraded indicative offer of A$5.83, reflecting uncertainty about whether a deal will go to completion.

“This price is pretty attractive but it is not without risk,” said Gareth James, an equity analyst at Morningstar.

“While the outlook looks pretty good at the moment, there have been some contract losses and earnings haven’t really grown.”

The deal would present a win for BGH’s Gray, who has yet to complete an acquisition since starting the firm in 2017. Gray was not immediately available for comment.

Navitas, which provides English courses for foreign students in Australia, North America and Britain, is vulnerable to tougher U.S. immigration policies, visa rules and currency movement.

Last year Navitas forecast a “medium-term” downturn in the United States and closed two U.S. colleges due to the impact of hardline immigration policies.

Navitas has granted exclusive due diligence to the consortium until Feb. 18, by which time the education provider expects to sign a binding scheme implementation deed.

Reporting by Colin Packham and Byron Kaye in SYDNEY; Additional reporting by Aditya Soni in BENGALURU; Editing by Christopher Cushing

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