Learning Tree International, Inc.announced on 28 May that a special committee of its independent directors has decided to solicit offers to purchase the company. The reason seems to be that the company's founders chairman Eric Garens and vice chairman David Collins are looking for "diversification and liquidity to accommodate their charitable interests".
Learning Tree, founded in 1974, is a leading provider of vendor-independent education and training to IT professionals and managers in business and government organisations. The company develops, markets and delivers a broad, proprietary library of instructor-led courses focused on Web development, operating systems, programming languages, databases, computer networks, computer and network security, object-oriented technology, project management, leadership, communications, business analysis, and strategic business skills.
The company also tests and certifies IT and business professionals, and its courses are recommended for college credit by the American Council on Education. Learning Tree is also on the National Association of State Boards of Accountancy National Registry of CPE sponsors and is a registered education provider of the Project Management Institute (PMI).
Says Learning Tree president and CEO Nicholas R. Schacht, "For over 33 years, Learning Tree has taken the lead in providing the highest quality, vendor-independent education and training for managers and IT professionals worldwide. In the past year we achieved significant improvements in profitability and revenue, further enhancing our already strong financial position. We believe this is an appropriate time to solicit offers to determine if a sale is the best way to maximise shareholder value. A sale would also address the desires of our two founders, who remain our principal shareholders, for diversification and liquidity to accommodate their charitable interests."
The fact is that the company's market performance has not been as good as peers or the market average. As the graph below shows, return from investment in Learning Tree in the five years to September 2007 was lower than that for the peer group average or on the NASDAQ composite.
The less than average market performance is not surprising. The company made losses for three years in a row (see table). Revenues too have stagnated.
In the year ended September 2007, Learning Tree had 495 employees and 655 instructors; and it organised 7,023 course events with nearly 90,000 participants and accounting for close to 340,000 attendee days.
Learning Tree has retained RBC Capital Markets, a subsidiary of the Royal Bank of Canada, as its financial advisor and Manatt, Phelps & Phillips, LLP as its legal advisor. The company has not ruled out either continuing as a stand-alone company or pursuing some other strategic alternative. The company says it does not plan to release additional information about the status of this process until a definitive agreement is executed or Learning Tree otherwise determines that further disclosure is appropriate.
The founders have built in provisions in the company's restated certificate of incorporation to deter hostile takeovers. The risk factors include the company's anti-takeover provisions, about which the company's website has this to say: "Certain provisions of our restated certificate of incorporation, our bylaws and Delaware law could adversely impact the interests of our stockholders ... Certain provisions of our restated certificate of incorporation, our bylaws and Delaware law could, together or separately, discourage, delay or prevent a third party from acquiring us, even if doing so might benefit our stockholders. These provisions may also affect the price investors would receive for their shares of our common stock."
- the division of our board of directors into three classes;
- the right of our board of directors to issue preferred stock with rights and privileges which are senior to the common stock, without prior stockholder approval;
- certain limitations of the rights of stockholders to call a special meeting of stockholders; and
- the prohibition of stockholder actions by written consent.
|Learning Tree International financials|
| ||2003 ||2004 ||2005 ||2006 ||2007 |
| ||(Restated) ||(Restated) ||(Restated) ||(Restated) |
|Revenues ||$152.6 ||$152.1 ||$151.6 ||$154.0 ||$167.2 |
|Income (loss) from operations ||$5.3 ||$(1.6) ||$(2.2) ||$(2.6) ||$14.5 |
|Net income (loss) ||$4.2 ||$(0.5) ||$(1.7) ||$(3.1) ||$17.0 |
|Diluted income (loss) per share ||$0.24 ||$(0.03) ||$(0.10) ||$(0.19) ||$1.03|