Company filing on Pledge Shares today - Matches with the workings…remaining pladge stands at only 26700 shares
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Tree house education board meeting outcome
Looks like this consolidation is good for Zee learn shareholders compared to Tree house education ?.
ya looks -ve for tree house share holders…many bought it 300+…any valuable comments on future of zee learn/ Merge?
Definitely a big negative. The valuation report completely seems to ignore the book value, turnover as well as profitability. There seems to be some inside settlement between the promoters (speculation at my end). Hope the PE investors of Treehouse oppose the deal as the company by itself does not need any capital.
how to oppose the deal?..can it be done by few share holders?
Not likely, it’s unfortunately one share one vote. Although I’m quite hopeful that the institutional investors - which together hold > 40% in the company should oppose the deal. (It’s similar to Cairn Vedanta deal proposal and how it got thwarted). We just have to wait for the EGM date and try to understand what’s going on.
Doesn’t look good at all for Tree house shareholders. Not at all sure why is this being done in this way?
No consideration of book value/net profit etc. Zee learn is at PE of 131 now and valuing Zee Learn with Tree house numbers just doesn’t work out. Unless something is wrong with tree house books which public is not aware…
Considering 4.23cr shares of Tree House, is Zee Learn is going to issue 22.42 crore new shares? Zee learn is so expensive now that even after the merger of tree house, it will be at very expensive levels and doesn’t make sense to hold shares.
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Tree House is down 5% today and Zee learn down 2.5%. Though the deal is not in favor of Tree house share holders and quite a good deal for Zee Learn, curious to understand why would someone want to exit either of the shares now?
The deal over values zee learn as far as I can call after seeing the numbers. So I sold out today at 9:15 am at average of 199/-. (I had bought at 153/- recently, so selling at 30% gains and wish that the company does well for the sake of small shareholders)
If I buy 100 Treehouse at CMP of 196 ie at Rs 19600. That means I will get 530 of Zee Learn. CMP of Zee Learn is 40.5. That means at 21465. It is cool 10% profit. What is wrong in this Logic? Does it mean Zee Learn is going to fall
That makes in a way sense of selling shares of Tree House.
Zee Learn is valued very highly and difficult from valuation wise holding on to those shares. Zee Learn might not trade at the current valuation post merger.
I thought that treehouse share was worth atleast 300/- and upto 400/- without the promoter pledging concern. I hoped that this concern would subside that the share will trade at 300-400/- in an years time. there may not be huge downside now , but according to me the upside is capped after the valuation being assigned to zee learn.
Right… From a valuation wise Tree house is quiet undervalued now and agreeing to go for all stock deal with highly overvalued company such as Zee Learn doesn’t make sense. The one I am guessing is the promoter of Tree house wants to completely exit and make some quick money.This deal gives them an opportunity sell their stake and pocket ~150cr which may not have been possible if the Tree house remains independent.
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The deal is completely negative for treehouse shareholders. Treehouse shareholders must oppose it irrespective of number of shares held.
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Actually it may not be that negative also. Zee learn runs 1500 preschools (checked their website) , more than treehouse and the consolidation may be good for both companies ( gives clear market leader, reduces competition, gives pricing power etc).
My rough calculation goes as below, (this is just one side view, there are many others we got to see)
Zee Learn net profit FY15 is 9Cr and EPS is 0.30. With Tree House it is expected net profit to go as high as 70Cr (Tree house bringing in 60cr as on FY15 and no additional debt on the books) and EPS comes to 1.1Rs (outstanding share increasing from 32cr to 54cr).
A significant jump for Zee Learn in net profit and also EPS considering how cheap they are able to buy Tree house. But the concern is still at what price you would give to Zee Learn. Today’s price of 40Rs at 130 PE is too high and post merger at the same price of 40 Rs the PE will be ~40 which is still high. Where as Tree house is trading at 14 PE. Will the combined Zee Learn at 40PE is better than independent Tree House at 16 multiples?
The merger ratio is extremely against treehouse shareholders. The comparision of number of schools is not valid as most of the treehouse schools are owned where as zee schools are franchisees. A frachisee centre cannot be compared to owned centre. Revenue of treehouse is almost double of that of zee learn. Profit of treehouse is almost 7 times that of zee learn. Margin is very good in treehouse. Keeping these in view the merger ratio is extremely unfair to treehouse.
On top of that there is no need of merger for treehouse. There is no requirement of capital for treehouse. Internal accruals are enough for planned expansion of treehouse. Management must explain rationale of merger when treehouse stock is extremely undervalued and zee learn stock is extremely overvalued.
Management must make public the reports based on which this merger ratio has been decided. This merger ratio can be justified only if Treehouse accounts are fudged… and if that is fudged, treehouse management must go to jail rather than covering the forgery with merger.
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Based on the updates from both Tree house education & Zee learn, they got Valuation report & Fairness opinion prepared by M/s SSPA & Co and Inga Capital Private Limited respectively to arrive at the merger ratio.
How to get access to this report & opinion ?. These reports should give insights on how the merger ratio was arrived at.
Shouldn’t Zee & Tree house education be publishing these reports for shareholders ?. Eventually the shareholders need to vote on the merger (and so this information will be crucial for the shareholder to decide for or against the merger).
Note: I’m planning to write to Tree house education for these reports (as a shareholder) and would recommend other shareholders to do so.
I send a mail to Company Secretary/Compliance officer of Treehouse ( compliance@treehouseplaygroup.net) asking for copy of the reports. If I will not get a prompt reply, I shall be raising the issue with SEBI. Management of treehouse must come clean on the issue.
As per 04 Dec 2015 “Outcome of Board Meeting”, there were two major announcements. One is the board’s decision on exploring consolidation with Zee learn and other thing is the one shown below (I’m sure most of us would have read this and easily missed its significance after reading about the consolidation proposal).
The Board has accepted the resignation of Mr. Rishi Navani with effect from December 03, 2015 and the Board wishes to place on record his contribution & support to the Company.
The significance of the above statement is that, Mr. Rishi Navani co-founded Matrix India, which invested multiple rounds in Tree house (starting 2008 - http://www.matrixpartners.in/press_detail.php?id=35 ). This resignation means, he didn’t want to be part of the board which approved consolidation/merger (?) or he knew the merger ratio won’t be favourable to existing Tree house shareholders even before all this played out. Being part of tree house board would mean he agrees to whatever decision board takes and eventually he may have to support the board decisions. Matrix India have already sold most of their stake in tree house, but they still held 12.05% of tree house as of Sep 2015 shareholding report. I do not know if Matrix too have sold their stake post this announcement.
On googling, I did find another link where Rishi made the following statement
“We still hold substantial number of shares in the company and will take at least two-three years for a complete exit,” says Rishi Navani, managing director at Matrix Partners India. “We are looking at a significant and quality buyer for Tree House and not just a short-term buyer,” he told VCCircle.
Read more at:
There are multiple possibilities I can think of here (based on Rishi’s resignation from Tree house board)
- Matrix India would have already sold their remaining 12% stake in the last few weeks. Since Matrix India invested pretty early and had sold most of their stake would mean they made enough profits on Tree house already
- Matrix India is against the proposal of this consolidation (or the proposed merger ratio) and likely to vote against it (12% is a big number to vote against, provided other VC’s or big investers vote against this merger). But then what are the options (look for a new buyer or find a competent management ?).
Finally, If we can get hold of the Valuation (and corresponding Fairness Opinion) reports, that would give enough clue on how the merger ratio was arrived at. Who knows, the merger may be good (because we do not know lot of things at this point and based on what has happened in the last few weeks, I don’t see Tree house’s current management to be competent enough and so for sure it has to get a better management one way or another)
Is there way to find out if some of the bigger shareholders in Tree house (including Matrix India, Bajaj Holdings, Elara India, Aditya Birla Pvt Equity Trust etc.,) are for or against this merger proposal ?. Its high time we create a forum for communication between all shareholder minus promoters 
(Do we have one already ?, If not some one can startup !!)
Side note: Found the below link which talks about minority shareholders rights
"http://economictimes.indiatimes.com/wealth/invest/equity-investors-do-you-know-your-rights/articleshow/50279793.cms" .
@Donald / moderators, Do we have a thread in VP which talks about minority shareholder rights ? I guess it is very much needed.
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