Canada-based KGIC (formerly Loyalist Group) has said a statement issued last year declaring the sale of Korean education agency Uhak.com “may have been premature”, as the sale of the asset had not been consummated.
Uhak.com was originally bought by KGIC in 2014 for over $8m. The company then announced in October last year that it had sold the agency and closed the sale.
KGIC, owner and operator of a group of ESL schools and career colleges in Canada, was under former management at the time.
“Until all the t’s are crossed and i’s are dotted, you cannot say you’ve sold an asset”
Speaking exclusively to The PIE News, the current CEO, Alex MacGregor, called the sale “suspicious”.
“It was a shock to me initially when I saw a [$8m+] transaction in barely a year, and the agency was sold back to Korea for $100,000,” he said.
“You see a lot of red flags right there. We discovered yes, the board of directors of the company did approve the sale of the agency in principle, but they did not approve the actual transaction itself.”
In October, former CEO, Shawn Klerer announced the sale of the agency arm of Loyalist Group saying it was “a distraction from what we do best”.
However, MacGregor has said this sale was never completely finalised.
“The press release should have said something to the effect of ‘there is an offer to purchase and there’s a principle transaction that is anticipated’,” he said. “Until all the t’s are crossed and i’s are dotted, you cannot say you’ve sold an asset.”
He said the public announcement of the sale was “premature” and impacted the company’s financial health.
“You can imagine a lot of our assets have been eroded as a result of some of these actions and that’s created a snowball effect that actually affects the company’s financial health, which affected our business.”
MacGregor said a committee had been appointed within the company to look into this purported sale.
“They looked at some of these transactions and reported back that these are very suspicious, and we are going to seek legal advice into what further action to take.”
The education agency’s operations are currently run by parties in Korea.
KGIC has said in a statement that the company has taken legal action against the new owners for the non-payment of accounts owing for student tuition. On July 4, a statement of claim was filed and issued by the Ontario Superior Court of Justice to recover accounts receivable and damages for defamation, the company’s release continues.
“You can imagine a lot of our assets have been eroded as a result of some of these actions”
“We haven’t sold it technically under law, we had an offer to sell it, the offer to sell it in itself was dubious, and even the proponent sale itself was not consummated,” commented MacGregor.
“Meanwhile, the so-called buyer [is] running this agency and making money out of it.” The PIE News has contacted Uhak.com for comment but has not yet had a response.
MacGregor took on the position of CEO at the end of last year alongside a new chairman Geoffrey Smith.
Together with a newly appointed board, they are seeking to restore the company’s assets.
Despite the review of the Uhak.com transaction, the company’s schools are operating as usual, maintains MacGregor.
“When you have a good solid management with good experience, and they know what they’re doing, and you have a commitment to the business, then you picked the right result,” he said.
The company’s Q2 results released this week show it fared better this year than last, despite still reporting losses. The company reported a negative $2.4m EBITDA for 2016, which in the same period last year was close to negative $5.5m.
The loss from continuing operations before other items was $3.6m, a 79% improvement on 2015 Q2’s $17m loss.
Tuition revenue however, was down from $8.2m in 2015 to $5.8m, partially attributed to the closure of some of the company’s schools.
“New management believes that improved relationships with student recruitment agencies coupled with implementation of the new marketing plan that diversifies student recruitment to China, India and Brazil will improve revenues,” the press release stated.
