Sale rumoured for prestige schools
The equity company which owns New Zealand’s largest provider of private education may be looking to cash in on its investment.
Last week Newsroom reported on parents’ disappointment with issues at two of the private schools run by ACG Education which is owned by Pacific Equity Partners (PEP).
Class sizes at ACG Parnell College have been increasing with a large number of students with English as a second language soaking up teacher time. ACG Senior College is being closed down.
Parents feared the influx of foreign students, who pay higher fees than New Zealand students, and the closing of an inner-city campus were part of a “pump and dump” strategy to make the group more attractive to potential buyers.
When Newsroom asked ACG on June 12 if there were plans to sell the ACG Group, ACG Education communications and public relations advisor Anna Murdoch said: “There are no plans to sell the ACG group.”
An article published June 18 in the Australian Financial Review has confirmed parents’ fears, saying PEP are exploring early liquidity options.
PEP purchased ACG in 2015 for around $500 million. The article says sector analysts estimate the value to now be over $1 billion.
Options PEP are said to be exploring include a debt refinance or the sale of properties owned by ACG, which ACG could then lease back.
There is also an option of selling all, or part of the group. This may mean the schools part of the business gets split from tertiary and sold separately.
Parents said they have not been made aware of PEP’s plans but were unsurprised at the news.
“I just don’t have any trust left in them, so in that sense I am not surprised because they’re not proven to be trustworthy. I’m now on high alert for whatever they do,” said one parent from ACG Parnell College.
ACG Senior College parent, Julie Dick, was also not aware of the equity firms plans.
She found out the college was closing three days after her daughter started at the school. Students remaining at the Auckland inner-city campus can be integrated into ACG Parnell College. The colleges have very different characters and parents from both colleges are uncertain what the integration of the two schools will mean.
Two meetings have been held with school parents. Dick said these were emotional and parents were unconvinced with the honesty of the reasons given for closing down the campus.
“One parent even stood up and said don’t bullshit a bullshitter. You’re doing this for the dollar, it’s got nothing to do with our kids, it’s because your corporation wants money.”
She said parents were told it was better for the children to be in the larger, more vibrant environment the new campus, shared with ACG Parnell College students, would offer.
“Parents were saying ‘Since when are bigger class sizes better for kids?’”
In the most recent meeting held on Wednesday, Dick said the impression she got was ACG felt parents need to “get over it now” and it didn’t care whether parents chose to send their children to the Parnell college or to find an alternative school.
“ACG were even less interested in what parents had to say.”
The Australian Financial Review article said “tyrekickers” to PEP had been told ACG’s schools business has been growing by 17 percent a year with growth underpinned by new campuses and expansions to existing campuses.
PEP is Australian, with many of its funds registered in the tax haven Jersey. It has a history of buying and selling New Zealand investments.
Griffins and Tegel Chicken were bought and sold within 10 years of purchase for several hundred million dollars more than was paid.
New Zealand's Independent Liqour was sold by PEP and another equity firm, Unitas, for $1.5 billion to Asahi. Later the two firms and their insurers refunded Asahi $220 million in an out-of-court settlement after Asahi launched proceedings in Australia claiming the two equity firms engaged in misleading and deceptive conduct by inflating Independent Liquor’s earnings.
Dick also was unsurprised to hear of PEP’s plans for ACG.
“They are playing a corporate game and honestly, they may as well be dealing in bottles. They’re certainly not dealing in children.”