When you think about disruptive education models in SA, Curro usually comes to mind. But Advtech has been gathering and regrouping. Leslie Maasdorp CE of Advtech tells us about the company’s R450m acquisition of the Maravest Group – a deal worth 12% of its current market cap – and the possibilities for education in South Africa. – CP
ALEC HOGG: ADvTECH announced yesterday that it is going to acquire the Maravest Group for R450m. In the studio with us to tell us more, is ADvTECH Chief Executive, Leslie Maasdorp. Twelve percent of your market cap. This is a significant transaction and I’m glad you could come and give us a little bit more of an insight into the strategy. So often, we had your predecessors sitting in that chair, Frank Thompson, and Gugu was ruthless in saying to him, “Why have you not taken some heed of what’s happening to Curro and Curro’s growth, etcetera.” This is a big deal though and maybe a move in that direction.
LESLIE MAASDORP: A couple of things, Alec, but firstly, thanks for having me. Secondly, the big story, I think, is that ADvTECH’s student enrolment for 2015 will increase by 70 percent, so this is not just as a consequence of the Maragon or Maravest deal that we’ve just announced yesterday. It is also a result of Centurist and the other transactions we’ve …
ALEC HOGG: Just slow down there 70 percent?
LESLIE MAASDORP: Percent, yes, student enrollment.
ALEC HOGG: That’s upper growth.
LESLIE MAASDORP: Yes, exactly. Let me also say that whilst I’d like to take all the credit for these acquisitions. These acquisitions have been in the making for a while. Transactions of this nature don’t happen overnight, as you know. In fact, my school’s division have had a relationship with Maravest for several years, so we often, kind of conditions, that enable a transaction to happen, and it just so happened that it sort of co-list around this time. As much as I’d like to take all the credit, it certainly is not for me.
The second point, I think about this deal, that’s important is Alec, is that it consists of both premium schools, which is the area where we are the market leader in South Africa. As you know, we are on the Crawford Schools, Trinity, Abbots College, etcetera. In addition to the premium schools, which fit into that mold, Maravest or Maragon Group, also own a couple of low fee and low fee schools.
That’s the area where we signaled that’s a new market for us to enter, where there’s significant growth, so this will mark our modest entry in that space. We are going to explore, in a real laboratory, actually having to run these institutions, how best to make that model work.
The further aspect of this deal that is very exciting for me is the fact that management is coming, having bought into the ADvTECH Division, and taking stock in the company.  We’ve signaled in our announcement that the bulk of the purchase consideration will actually be in shares, meaning that they want to be incentivised, as part of ADvTECH, going forward.
Finally, what’s exciting about the deal is there’s an embryonic sort of digital, sort of technology company, within Maragon, that I think is also very exciting, so they kind of create and distribute curriculum content, to students. Hopefully we’ll be able to do that outside of our school constituency as well because the future, as you know, (we spoke about Microsoft before I entered the studio), the future is technology and technology is changing the way education delivery models will unfold.
GUGULETHU MFUPHI: I want to go back to your increasing your exposure, into the low fee schools. Doesn’t this mean that you have to really, fight to get a good deal because yourself and Curo are looking to move into that market, a lot more aggressively?
LESLIE MAASDORP: A couple of things. Firstly, I think there’s going to be a number of players that will enter the space. There’s a massive demand. There’s clear evidence that there’s a massive demand for quality education out there. Curro is out there, and I think there will be several others. There’s a new company that will be launching a few schools next year, called Pioneer Academy, Spark Schools are growing, and then there are several others who have come onto our radar. Whilst there is the competitive landscape is certainly increasing, but we believe that there’s a significant opportunity. That market is so bit that we are not concerned that we’ll be, sort of our assets will eventually become overpriced, as a result of the increasing number of players.
ALEC HOGG: But you’re the market leader, so you really do have the advantage, often as a market leader does, to lose it or just to re-gather yourself. It appears as though, in the past little while, you’ve been doing that. You’ve been re-gathering and looking to how you are going to go forward. You did mention digital. What about distance education? Is that a threat to you or, perhaps, an opportunity?
LESLIE MAASDORP: Distance education is a big opportunity. Up until now, I’ve mainly spoken about schools, right, but we’ve got two other divisions that are critical divisions in our stable, the one is statuary, where I see significant growth opportunities and distance is the main driver of that. When you study the world over now, the sort of leading universities, in fact the Ivy Leagues, as we spoke about the other day, the Ivy League Universities, all of them have established distance platform. The movement, the mass open online courses, is the order of the day, so we, at this stage, we’ve invested over the last while in the platforms, right, but we don’t have a solid distance offering yet, but that is definitely part of the strategic path for our tertiary division, going forward.
We could, if I think about it, we could have thousands of students from Kenya, Nigeria, English speaking Africans throughout the Continent, be ADvTECH students, through varsity/college through our existing institutions in South Africa, if we get the distance platform right.
ALEC HOGG: Africa’s University of Phoenix.
LESLIE MAASDORP: Exactly, I mean to, I must actually remember that. The Africa’s University of Phoenix is good because the University of Phoenix has actually transformed, if you think about it, in the U.S., very few people know about the University of Phoenix. It is the most, in fact, Google published a study, which suggested the most searches actually, is for the University of Phoenix, and that’s because they’ve managed to establish themselves as a market leader, in that space in the U.S.
ALEC HOGG:Â Hundreds of thousands of students.
LESLIE MAASDORP: That’s exactly right. In fact, Coursera, the open online, sort of most well known firm, I don’t know if you know about the former President [inaudible: 06:14], is now one of the leading lights at Coursera, and they now have seven million online registered users. Now, these are not all students, etcetera, but to capture seven million people onto your sites, onto your courses, at some stage they will have to monetise that. There are still experiments going on, how best that platform will work but, undoubtedly, we will have to enter that space and grow it onto the Continent.
ALEC HOGG: A big, mindset shift, if you wanted a campus to get seven million students, imagine. You’d need something the size of Johannesburg. That was ADvTECH, Chief Executive Leslie Maasdorp.
