Ambow (AMBO) Sheds Assets to Focus More on Tutoring and Career Enhancement
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Ambow Education Holding Ltd. (NYSE: AMBO), has announced a number of asset divestments that completed before the end of fiscal year 2011 to sharpen the focus on its growth layer, which consists of Tutoring and Career Enhancement. The Company completed the following transactions:
The Company expects to record a non-cash charge arising from disposals of approximately US$23.0 million for the fourth quarter of 2011, or 5.0% of net equity value at the end of third quarter of 2011 as a result of the above transactions. These transactions are expected to generate proceeds of US$34.6 million while reducing the Company's liabilities relating to acquisition consideration by approximately US$32.0 million, therefore significantly increasing its financial flexibility to further invest in strategically important growth areas.
The Transaction with Xihua Group relating to Beijing Century College and 21st Century K-12 School
Noting that Beijing Century College may not meet government minimum campus size requirements for classification as an "Independent College" before the applicable deadline, Ambow reached an agreement with the previous owner, Xihua Group to return Beijing Century College and its 100% owned Beijing Siwa Century Facility Management Co., Ltd for a consideration of US$29.1 million. Xihua Group has the right to pay part of the purchase price by returning the Ambow shares it owns having an equivalent value.
As part of the above agreement, Xihua Group also agreed to waive a net amount of US$11.0 million payable from Ambow to Beijing Century College and 21st Century School. In addition, Ambow was relieved of its remaining payment obligations to Xihua Group based on the original acquisition agreement, which were estimated to be approximately US$32.0 million as of December 31, 2011.
In addition, Ambow agreed to return 21st Century K-12 School to Xihua Group for a 15-year operating right effective January 1, 2012. It also agrees to jointly fund future capital expenditures through separately negotiable agreements. This transaction will have no material impact on the Company's revenue and net income in fiscal year 2011 and is expected to reduce Ambow's obligation to finance future capital expenditures of the school.
The Sale of Tutoring and Career Enhancement Subdivisions
Ambow sold its Xi'an Tutoring (Tutoring), Shandong Software Companies (Tutoring), Guangzhou HP Tutoring (Tutoring), and Tianjin Holding (Career Enhancement) subdivisions as a package for cash consideration of US$5.5 million payable within one year from the transaction date.
- It sold its Beijing Century College and its 100% owned Beijing Siwa Century Facility Management Co. back to its original owner;
- It returned its 21st Century K-12 school assets to its original owner for a 15-year operating right of the school. It also agrees to jointly fund future capital expenditures through separately negotiable agreements; and
- It sold one career enhancement and three tutoring subdivisions as a package.
The Company expects to record a non-cash charge arising from disposals of approximately US$23.0 million for the fourth quarter of 2011, or 5.0% of net equity value at the end of third quarter of 2011 as a result of the above transactions. These transactions are expected to generate proceeds of US$34.6 million while reducing the Company's liabilities relating to acquisition consideration by approximately US$32.0 million, therefore significantly increasing its financial flexibility to further invest in strategically important growth areas.
The Transaction with Xihua Group relating to Beijing Century College and 21st Century K-12 School
Noting that Beijing Century College may not meet government minimum campus size requirements for classification as an "Independent College" before the applicable deadline, Ambow reached an agreement with the previous owner, Xihua Group to return Beijing Century College and its 100% owned Beijing Siwa Century Facility Management Co., Ltd for a consideration of US$29.1 million. Xihua Group has the right to pay part of the purchase price by returning the Ambow shares it owns having an equivalent value.
As part of the above agreement, Xihua Group also agreed to waive a net amount of US$11.0 million payable from Ambow to Beijing Century College and 21st Century School. In addition, Ambow was relieved of its remaining payment obligations to Xihua Group based on the original acquisition agreement, which were estimated to be approximately US$32.0 million as of December 31, 2011.
In addition, Ambow agreed to return 21st Century K-12 School to Xihua Group for a 15-year operating right effective January 1, 2012. It also agrees to jointly fund future capital expenditures through separately negotiable agreements. This transaction will have no material impact on the Company's revenue and net income in fiscal year 2011 and is expected to reduce Ambow's obligation to finance future capital expenditures of the school.
The Sale of Tutoring and Career Enhancement Subdivisions
Ambow sold its Xi'an Tutoring (Tutoring), Shandong Software Companies (Tutoring), Guangzhou HP Tutoring (Tutoring), and Tianjin Holding (Career Enhancement) subdivisions as a package for cash consideration of US$5.5 million payable within one year from the transaction date.
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