ABS a.b.c. learning centres limited

abc share sale mystery

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    You have to ask if the directors will get a please explain!


    John Durie | February 27, 2008
    THE fate of ABC Learning shares hangs in the balance today after the company suspended itself from trading, claiming it was in talks about a potential sale of some assets.

    In reality its bankers led by the Commonwealth Bank have clearly moved on the company and told its boss Eddy Groves to do something fast or they would be forced to take control.

    More mystery was added to the story when the company disclosed two directors had sold shares on Tuesday. David Ryan sold his entire stake of 249,100 shares at $1.89 a share and Martin Kemp sold 7.6 million shares, some yesterday but two million were sold last week.

    Last week’s sale has raised questions because as the chief executive of the company, he would normally be prevented from selling shares one day before the company released its results.

    Moreover, he sold the parcel on Friday at $3.75 a share when two days earlier the stock fell as low as $3.73 a share, which means if there was a margin call it would have happened before Friday.

    Then there was the crossing of 10 million shares, or 2 per cent of the company, reported this morning.

    The sellers were presumably management and most likely Groves himself, given Citibank would have called him on money lent to buy his 20 million shares.

    The buyer of the stock is rumoured to be Bain Capital, the US private equity fund.

    Some argue the latest episode highlights the efficiency of the stock market in sorting out good and bad companies, while others say the market has taken its time to come to the right conclusion.

    The company now says its debt covenants hinge around net assets being above $2 billion, so it is okay because its net assets stand at $2.2 billion.

    Trouble is that figure is reached by including $3 billion in intangibles, being the value of its 2000 kindergarten licences at $1.5 million a pop.

    Just how this figure is reached is the problem and no doubt concerns the bankers when the potentially dodgy valuation is the only thing keeping the company out of the banks’ hands.

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