The Idp Education Ltd (ASX: IEL) share price sank almost 6% today as investors learned that IDP’s main shareholder is going to sell all of its shares.
IDP Education is one of the world’s biggest international education businesses that help people with their study, work and language goals. It works with both educational institutions and students to find the right overseas study. IDP partners with 700 universities and institutions. IDP Education also provides English language teaching, as well as an English language testing system that is designed to assess the language ability of people who need to study or work where English is the language of communication.
What happened to the IDP Education share price today?
The company announced that after a period of consulting, it has been advised the Board of Education Australia has entered into an agreement with The British Council and The Chancellor Masters and Scholars of the University of Cambridge acting by the University of Cambridge Local Examinations Syndicate regarding a restructure of Education Australia’s shareholding of IDP.
Education Australia is going to do two things that will see it deal with its 40% shareholding of IDP.
The first thing is making an ‘in specie distribution’ of a 25% shareholding of IDP shares to all of its 38 university shareholders, with those shareholders each becoming the direct owner of 1,831,159 IDP Education shares.
The remaining 15% will be divested through a market selldown, which must occur by no later than 11 December 2021.
IDP said that the restructure will not impact IDP’s operations or strategy.
Education Australia said that each shareholder will be able to directly control its investment in IDP and benefit from further participation in IDP’s growth should it choose, while at the same time preserving IDP’s independence and broadening IDP’s publicly traded shareholder base.
What will Education Australia do with the money?
Most of the proceeds of the selldown will be used by Education Australia to pay the capital gains tax liability arising from this transaction. The associated franking credits will be distributed to Education Australia’s shareholders under the in specie distribution through a fully franked dividend.
As a condition of the consent provided, certain restrictions will be imposed on all of the 38 universities. One of the conditions is that from the date of the 15% market selldown is completed, each university will not be able to dispose of any of their direct shareholding for a period of six months, after that they can dispose of up to 50%, after first anniversary of the effective date they can dispose of up to 100% of the shareholding.
Summary thoughts
It’s a big sale and hopefully it doesn’t have any long term unintended effects on the IDP Education business. IDP Education is a quality business and it has done quite well in the face of all of the COVID-19 impacts. It’s an ASX share to watch, but negative impacts are also worth keeping an eye on.
