Clement Hii buys out PE fund Navis Capital in SEGi, triggers mandatory offer

KUALA LUMPUR (April 30): SEG International Bhd’s (SEGi) group managing managing director and major shareholder Tan Sri Clement Hii has bought out private equity firm Navis Capital Partners Ltd' 20.55% stake in SEGi for RM112.98 million cash — or 45 sen per share — triggering a mandatory takeover offer for the remaining shares in the education group at the same price.

Hii's EduEdge Equities Sdn Bhd, in which he is the sole director and shareholder, bought the stake that comprised 251.07 million shares from Pinnacle Heritage Solutions Sdn Bhd, which is controlled by Navis Capital. The offer price of 45 sen per share represents a 32% discount to SEGi's closing price on Tuesday of 66 sen.

Following the acquisition, the stake held by Hii, the ultimate offeror in the deal, rose from 32.46% to 53.01%. Together with the 0.08% SEGi stake held by his son-in-law Datuk Dr Dennis Ling Sie Hieng, who is a person acting in concert with Hii in the deal, their collective shareholding now stands at 53.09%, according to the offer notice sent out by AmInvestment Bank Bhd on behalf of EduEdge.

Navis Capital first emerged in SEGi 12 years ago in April 2012, when it acquired a 27.84% stake comprising 114.8 million shares at RM1.71 per share — for a total of RM196.31 million — from private companies Cerahsar Sdn Bhd and Segmen Entiti Sdn Bhd, the vehicles of Datuk Putit Matzen and Datuk Chee Hong Leong, respectively.

It then teamed up with Hii to take SEGi private, offering RM1.71 a share and RM1.21 a warrant, at a deal that valued SEGi at RM1.14 billion. However, the privatisation fell through after Affin Investment Bank advised SEGi shareholders to reject the offer as it deemed the offer price unreasonable and unfair.

From its shareholding in SEGi, which once rose nearly to 42%, Navis Capital received dividends and capital repayments of about RM175 million over the last decade, back-of-the-envelope calculations show. The PE fund also got bonus shares in 2017, on the basis of five bonus shares for seven SEGi shares owned.

SEGi, which has consistently paid dividends each year since 2014, undertook capital repayment of 15 sen per share or RM108 million in 2017. Since then, it raised more debt, lost its net cash position and saw net gearing jump to 1.65 times in 2018 before being reduced to 1.04 times at end-2023.

Despite being profitable over the years, SEGi's balance sheet showed that it fell into a negative reserves position in 2017 and has largely remained so. Its negative reserves stood at RM25 million at end-2023.

Hii wants to maintain SEGi's listing status

The takeover offer is unconditional as EduEdge, Hii and Ling collectively hold more than 50% of the voting shares or voting rights in SEGi now. The offerors, however, intend to maintain SEGi's listing status on Bursa Malaysia, said AmInvestment Bank.

"AmInvestment Bank, being the principal adviser to the offeror [EduEdge Equities] in respect of the offer, is satisfied and confirms that the offer will not fail due to insufficient financial capability of the offeror and the ultimate offeror [Hii], and that every shareholder who wishes to accept the offer will be paid in full in cash," the bank said.

For the financial year ended Dec 31, 2023 (FY2023), SEGi’s net profit dropped 71.2% to RM11.58 million from RM40.19 million a year earlier. Revenue fell 12.8% to RM186.46 million from RM213.94 million a year ago, mainly due to large graduating batches of postgraduate foreign students enrolled with the group’s institutions in the previous financial years, according to SEGi.

In March 2022, a top executive of SEGi quashed speculation of a possible sale of the company in the near term to a Chinese party. Talk of the sale to a Chinese group first surfaced in February 2020 and resurfaced in late 2021.

On Tuesday, shares of SEGi closed one sen or 1.54% higher at 66 sen, with its share price having only been traded within the range of between 65 and 71 sen over the past year. The group's market capitalisation stood at RM835.39 million.