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Loyalist Group in Canada makes second Korean agency acquisition

Canada-based education provider Loyalist Group has made its second Korean agency acquisition, buying the four Korea-based offices operated by Kim Okran International Studies Centre Inc., for CAN$4.65m. The deal follows Loyalist’s acquisition of, South Korea’s largest student recruitment agency, in November last year.

The acquisition will provide an additional net benefit of some $2.1m over the next year

Kim Okran is one of South Korea’s 10 largest student recruitment agencies, with four branch offices in the country and eight overseas affiliated study abroad agencies – seven in Canada and one in the Philippines.

“The initial plan was to acquire two of the most meaningful agencies in South Korea”

A cash payment of $3.9m will be made, and 1,442,307 common shares of the company will be issued at $0.52 per share.

“Building upon our recently completed acquisition of… the Kim Okran acquisition further enhances Loyalist’s vertical integration strategy,” Loyalist’s CEO Andrew Ryu said in a statement.

“By acquiring another one of our largest agency partners, we will be in a position to further reduce our direct costs of attracting students,” he commented.

“The acquisition will also provide Loyalist with a strong source for growing its student population.”

When asked about the group’s plans to expand in South Korea, Loyalist’s Vice President of Corporate Development, David McAdam, told The PIE News: “The initial plan was to acquire two of the most meaningful agencies in South Korea.

“We will continue to grow through accretive acquisitions and if there are additional South Korea based entities or agencies in other parts of the world, that are accretive and have Board approval, then we would look to close on those as well.”

According to Ryu, the acquisition is expected to provide an additional net benefit of some $2.1m over the next year thanks to increased student numbers and reduced marketing expenses.

“Kim Okran will continue to operate as a stand-alone entity”

Kim Okran’s revenue is based upon commissions earned on gross student tuition fees of approximately $20m. Consolidated revenue for the 12-month period ended December 2013 was $4.7m, with adjusted EBITDA of $0.9m.

This is on top of an expected annualised additional net benefit of around $2m from the deal within its first year.

Regarding commission, McAdam commented: “On a consolidated basis Loyalist will benefit from the fact that on a net basis, it has paid itself for the students who attended one of the schools under the Loyalist brand.

“Commissions with respect to students who attend other schools (whether in Canada, or another country) will be captured within the Loyalist consolidated results.”

Under the new arrangement the agency’s operations will remain the same, with the addition of one staff member to the existing management team to ensure daily, monthly and quarterly reporting requirements are met, McAdam said.

“Kim Okran will continue to operate as a stand-alone entity,” he explained.

The transaction will be completed on or around January 27, 2015.

“The Kim Okran team will make a fine addition to the Loyalist family,” Ryu added.

CORRECTION: This article was amended on 16.04.15 to clarify that Loyalist Group purchased Kim Okran’s four offices in Korea. It previously stated that Loyalist acquired the entire company, which was incorrect. A mistaken link to Kim Okran’s Canadian website has also been removed.

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