The new kids on the block in the higher education sector continue to make waves at a time when their traditional rivals are being forced to slash jobs with confirmation that the proposed merger of iCollege (ASX: ICT) and RedHill Education (ASX: RDH) has received unanimous support from both Board of Directors.
The merger will create an entity that will have a presence across all Australian States with a focus on delivering vocational education and training with greater diversity across course offerings. Together, the merged entity will have minimal overlap from their existing campuses where organic growth is expected to prosper by not competing against each other for students.
“We are delighted to confirm that following a broad and collaborative due diligence process, the iCollege and RedHill respective Boards have agreed terms to create a leading Australian Vocational and Higher Education and Training company backed by great talent, a diverse geographical footprint, established training infrastructure, and a strong balance sheet to pursue growth opportunities,” said iCollege Chairman, Simon Tolhurst who is also the proposed Chairman of the post-merger entity.
“The merged group will be better positioned to mitigate risk across student markets through a broader domestic and international student base and to capture growth once international borders reopen.”
Once merged, the business will have combined annual revenues of $59.8m with 65.8% of its students being classified as international and the remainder domestic.
Within the first year, the business expects to realise up to $1.35m in revenue synergy opportunities alongside cost savings which will be re-visited once the international student market recovers to pre-COVID levels.
Under the Bid Implementation Agreement, Redhill Education shareholders will receive 9.5 ICT shares for every RDH share held which as of 11 August represents a 53.5% premium on the 3-month VWAP.
New revenue opportunities will also be secured through the merger which will increase the education services offered throughout the student lifecycle and broaden the international recruitment footprint.
Upon completion, current RedHill CEO Glenn Elith will lead the merged company in the same role while current iCollege CEO Ashish Katta will join the Board as a Non-Executive Director.
The Bidder Implementation Scheme will be open until 20 September 2021 and has the unanimous support from the RedHill Board.
“We look forward to sharing the details and agreed structure of the transaction with our respective shareholders, before working to pursue significant growth opportunities available to the merged group to create value for all shareholders. In the near term, compelling organic growth, cross-selling and cost saving opportunities will be the focus of the MergeCo board as we work to recognise the potential synergies and opportunities.”
While the pandemic has had an adverse impact on many education providers due to a lack of international students, the greatest impact has been felt within the university education sector. Universities across Australia have been forced to cut jobs which included more than 17,000 positions axed in 2020.
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