Australian adult education provider Navitas Ltd on Monday rebuffed a A$1.97 billion ($1.4 billion) approach from its founder and a private equity firm, leaving some investors concerned the tactic may not generate a better deal.
Navitas said in a market filing that although the existing BGH-Jones price tag undervalued the company, it was willing to negotiate and give its suitors a “detailed management presentation” rather than unfettered due diligence.
The Perth-based company, which makes money teaching English to migrants, has been seen by analysts as vulnerable to shifting political tides as an immigration crackdown under U.S. President Donald Trump weighs on enrolments.
Operating in Australia, North America and Britain, it posted its first annual loss in August, and soon after its founder and former CEO Rod Jones and fledging private equity firm BGH made a takeover proposal at a premium to its share price.
By dismissing that approach and declining the suitors access to its financial records, a process known as “due diligence”, the company has raised investor doubts that the informal approach will result in a binding and compelling bid.
Navitas shares were up 1.5 percent at A$5.06 by mid-session, in line with the broader sharemarket gain but still far below the BGH-Jones indicative offer of A$5.50 per share.
“It’s unclear what the next steps are from this announcement,” said Suhas Nayak, a portfolio manager at Allan Gray, a major Navitas shareholder.
“We would have liked to have seen something that involved a fuller due diligence process.”
A spokesman for Jones, Navitas’s top shareholder, declined comment, while a BGH spokesman was not immediately available for comment.
Jones quit as Navitas’s CEO this year but still owns 18 percent of the company and remains a director. He has resisted pressure from Navitas to quit the board, and the two parties are yet to agree on how to separate his conflicted interests.
BGH was started by former TPG Capital Management Asia boss Ben Gray, former TPG partner Simon Harle and former Macquarie Group executive Robin Bishop in 2017, and has yet to make a major acquisition.
Philip Pepe, an analyst at Blue Ocean Equities, said Navitas was “not saying no, they’re just saying the bid doesn’t look like a knockout blow”.
The shares were trading below BGH’s indicative offer price because “without the data room open, there’s no guarantee a bid will come”, Pepe added.
