The sequel of "China Partner": The new Oriental exit route looms

"I always thought that if I didn't go public, the new Oriental would be better today." Mr Yu is still competing with the public. C FP for figure after the lights in the cinema faded, people's vision from the "New Hope" of "Chinese partners" (The new Oriental Prototype) of the inspirational entrepreneurial story, and gradually returned to the new Oriental Encounter "the U.S. Securities and Exchange Commission (SEC) investigation", "Muddy water short", close teaching points ... Reality. "We see" Chinese partner ", originally three people fight, suddenly listed, three people will be reconciled. Is that really true? Definitely not. "In the third China Private Training Education Industry Development Summit Forum," said Yu Blushes, chairman and chief executive officer of the New Oriental Education Technology Group, "I am still sorry for the new Oriental listing today." "With the previous" regret listing, "said the" quite different is that the rumors, there has been PE and new Oriental close contact to discuss the "privatization" matters. The so-called "privatization" means that the controlling shareholder of the listed company buys all the shares in the hands of the minority shareholders, expands the share, and eventually makes the public company into a private company. In this regard, Mr Yu also shot quickly. As of October 20, 2012, New Oriental executives had completed a 33 million dollar share buyback, according to public earnings reports. The new Oriental Board also authorized the company to buy up to $50 million worth of shares between April 29, 2013 and July 31. Compared to the 1-dollar price of the proposed privatization of the amber education, the new Oriental is now around 20 US dollar share price, for the actual controlling shareholder, repurchase share prices seem too high. The new Oriental PR staff is still vague, "the company has not mentioned the ' privatization ' matters." "What is the meaning behind the evasive?" Does Mr Yu want to privatize new Oriental? "Big and Beautiful" shattered June 6 morning, the scorching sun in Guangzhou, South all reporters came to the five mountain road Huasheng building New Oriental entry point, the scene only a receptionist, no one in and out. South reporters also came to the five mountain science and Technology square of the new Oriental Campus, the campus close to the south of South Asia University, in addition to receiving advice and registration, but also has a class classroom. But here is also silent, the corridor marked as "classroom" of several rooms are closed doors, no student access. South reporters came to the new Oriental in the urban Construction Building VIP Learning Center, the situation is similar. "Summer and winter is the peak season." A new Oriental employee said to reporters in South Asia. However, the property is rented, staff hired, the light is on, every minute is money. As a Nasdaq-listed company in the United States, the financial position of New Oriental (nyse:edu) has been exposed to everyone since the day it went public. The cost and the revenue change, people all see in the eye. The ebb and flow of the tide, the warm and cold is not only self-knowledge. April 24, New Oriental announced the third quarter of fiscal year 2013 (December 2012-February 2013), net profit of 28 million U.S. dollars, an increase of 25% year-on-year. And the previous seasonThe new Oriental has just experienced a loss, with a profit of $15.77 million trillion. Mr Yu, chairman and CEO of New Oriental's board of directors, said at the expense of a turnaround of 22 teaching centers and 11 new learning centers, with a total of 1200 employees being cut. The sharp contraction of the front is like a compromise on the capital market's profit requirements. In fact, the big expansion before the new Oriental contraction is another kind of compromise of similar nature. New Oriental official website data show that as of May 2012, the new Oriental in 49 cities nationwide set up 55 schools, 7 industrial institutions, 32 bookstores and 600 learning centers, the cumulative training of nearly 13 million trainees. But "only in the past 4 quarters, the new Oriental opened 238 learning centers." The number of schools in one quarter has increased by more than 40%. Li Ying wanted, an analyst who has long been concerned about the education industry, describes the pace of expansion in the new Oriental with "very scary". Obviously, the new Oriental has hoped through the rapid expansion, enlarges the overall sales, thus expands the market share, promotes the overall operating profit, pleases the capital market. But don't want to backfire. "In the past, the new Oriental can achieve the size of 400-500 people, the cost of a class is only about 3000 yuan, almost half of the small and medium-sized organizations." But now, the market demand has changed, the big class can achieve 100-200 people's scale is very remarkable. "New Oriental Lecturer MCA (alias) said that the less students, teachers, rent the higher the cost of the unit, the profit is naturally diluted." Mr Yu concluded that new Oriental had opened more than 200 teaching points, and that "only 500 teaching points had been opened in the past 19 years. You can immediately see what it will bring to the new Oriental. From the second half of the year before last, the first half of the new Oriental, one is a negative loss of 400 million yuan, of course, the overall new Oriental still make money, but if the direction of continued to go on, the new Oriental three years have been tossing over. So, development does not mean ' big is good '. "Education is a long-term thing, and profit is a short-term thing, both of which are inherently contrary." "Speaking of expansion for performance and contraction due to performance," said Huangsong, secretary general of the Center for Financial and Industrial development at Peking University, "The pressure is great and will lead to quality of education, quality of training or declining quality of the company's products." At the same time in the education industry and the capital market in the new Oriental, how to reconcile the contradictions between the two? More than the new Oriental, many of the domestic educational institutions that have already listed or want to have IPOs face such problems. How to solve? In the comments of new Oriental executives, the most frequently seen is the "regret listing", which Mr Yu often hangs on his lips. So, is there a "regret pill"? There, privatisation. Regret listing "New Oriental listing, with a good head, also brought a bad head." "In March 2011," The First China private training Education Industry Development Summit Forum, Yu Yu from the new Oriental after the various changes to talk about, a profound reflection of the current private education in many problems. The industry generally believes that whenWhen the Orient has been on the market for several years, Mr Yu has seen the pros and cons of it, and "The language is amazing". But in fact, Mr Yu's "regret listing" is old news for the new Oriental. "The new Oriental listing has a big impact on the whole group," he said. "Mr. Zhao, who worked in Chongqing's new Oriental, told the south reporters that soon after the new Oriental listing, he went to Beijing group training to listen to Old Yu in the General Assembly mentioned, on the Nasdaq listing feel very regret." South reporters repeatedly call Yu's mobile phone, has been no answer. In addition, the new Oriental Group Executive President Chen Xiangdong also to "release information, the view has strict procedures, need to go public relations channels" for the, declined the interview. South reporters contacted the new Oriental Public Relations Department, the relevant officials said the temporary arrangements for Mr Yu to interview, and proposed from Mr Yu and other new Oriental executives in the public comments to find answers. Interestingly, the "answer" posed by the so-called "executive remarks" is permeated with a contradictory atmosphere. In March this year, News of New Oriental, which broke 2013 two-quarter losses, said Mr Yu was negotiating with Alibaba to consider privatizing New Oriental. The new Oriental shares rose sharply for three consecutive trading days. But Chen Xiangdong responded to the media by saying, "It's nonsense." "In the third quarter of fiscal year 2013, New Oriental CFO Shedong also admitted in an analyst conference call that new Oriental had considered delisting in 2012, saying it was not difficult. And just recently in the "2013 China Private Training Education Industry Development Summit Forum", Mr Yu is still in the market "rivalry": "So far, I also think that the listing is not the best choice for the new Oriental ..." I have always thought that if I do not go public, today's new Oriental will be better. "A comprehensive overview of the privatization of the new Oriental," the speculation is much, implementation of less. Mr Yu himself has not mentioned the idea of privatization or even privatization. The story of Vie Tanhusebian Yu and the new Oriental has a special temperament ——— grass roots, twists and turns, in a specific time and environment, the dream into reality. In fact, the "listing", "privatization" of such capital markets, only the disputes between the interests, the demand for absolute rationality, which is so cool in movies. The "SEC investigation" and "Muddy Water Challenge Report" of the new Oriental encounter last year are typical examples, and the "knots" behind the examples are more daunting. July 11, 2012, the new Oriental announced that it has to simplify the "Beijing New Oriental" equity structure to further strengthen the company's corporate structure. Public data show that Beijing New Oriental is the new Oriental Variable interest entity (VIE), in the ownership structure simplification before the main 11 registered shareholders. After the adjustment, the new Oriental Equity in Beijing has all shifted to the entity under the control of Mr Yu. The move caused the SEC's vigilance. Six days later, New Oriental reported in its four quarterly report that it had received a letter from the SEC on July 13 about the change in the Vie shareholding. On that day, new Oriental shares plunged 34%. New Oriental insiders revealed that the VIE structure Adjustment was first proposed by Mr Yu, the reason is "these 10 old shareholders have faded out, if continue to maintain the original shareholding structure, may give the company in the annual inspection, signing agreement, management account and other aspects of the inconvenience." From the annual report of the new Oriental, these 11 original shareholders no longer appear in the shareholder's column of listed companies except Mr Yu. From November 2011 to May 2012, 10 outgoing shareholders signed the transfer, the company also completed the relevant registration. Despite the new Oriental emphasis, the VIE structure adjustment is to help the shareholders of new Oriental outside, strengthen the control of the new Oriental. However, "for the listed companies with VIE structure, the adjustment of board seats is very important, it can affect the ' holding merger ' matters." "A foreign accounting firm partner, Huangmin, told reporters in the south, perhaps, that the SEC is more concerned about whether a vie stake in the company is controlled by Mr Yu alone and that it is up to Mr Yu to cut off the link between the VIE and the listed overseas companies." 11 shareholders can at least act as checks and balances. It is said that the SEC at that time to check the new east, the investigators flew to Beijing several times, the new Oriental in the calendar of the thousands of contracts involving equity in all the translation into English; e-mail in the mailbox is also all printed out, even if it is deleted mail, but also to use special means to restore, Yu Yu personal mailbox more than 30,000 emails, investigators each read. "This is actually related to the big environment at the time." "Huangsong explained, one of the first is Ma Yun's Alipay event," The Americans will think that the name of the famous Ma Yun on "Fortune" magazine, should be regarded as China's most representative entrepreneur, and finally do such things. They'll think, do you want to do something like that in New Oriental? "The second, Ma Yun mentioned that this is a" unspoken rules "(the Vie Agreement control), so there were many statements, such as the Vie unqualified and so on. As a result, investors in the United States, as well as regulators, on the Vie three characters naturally Tanhusebian. "As a result, the new Oriental in this context of the VIE structure adjustment, plus Mr Yu Daily shout regret, the SEC is not nervous." "New Oriental executives have repeatedly said publicly that" the Vie affair, the new Oriental and Alipay are two different things. "But in the eyes of the Americans, the VIE is the main way for Chinese companies to go overseas, and the details differ, they don't care." The man on the tightrope new Oriental did not release any listed company announcements on the purpose, process and progress of the vie adjustment. What Mr Yu does not know, however, is that the VIE structure has long been under the eye of a shorting agency, the muddy Water company. July 18, 2012, the short body of muddy water Company on the website published a nearly hundred pages of research report, accusing the new Oriental deliberately concealed franchise stores information, business income financial fraud, tax relief unreasonable, and audit loopholes, the new Oriental shares fell 35%. Although the new Oriental responded quickly, the share price gradually rally. But, Mr YuLater admitted that the problem of the identity of private education institutions, muddy water is caught "key". Muddy Waters believe that the new Oriental vie under the structure of the school held in fact "state-owned assets" should not be and into the table, such as Shanghai Yangpu and Beijing Haidian Two, its assets will be nationalized at the end of school operations. Moreover, the income of the new Oriental has the profit-seeking purpose, also cannot enjoy the tax exemption preferential. It is noteworthy that, "VIE structure of the company generally invested in the establishment of a wholly foreign-owned enterprises, for the domestic business entities to provide monopolistic consulting, management, software and other services." The domestic business entity shall pay all its net profit to the wholly foreign-owned enterprise in the manner of ' service charge '. A wholly foreign-owned enterprise will then export assets and proceeds to offshore offshore companies. "Huangmin to the South reporters explained that the model under the domestic operating entity is usually light asset companies, but" Beijing New Oriental "is a typical heavy assets," new Oriental how to more than 700 teaching points of assets, income into foreign companies "this is the problem. Huangsong that China's educational institutions are non-profit organizations, the new Oriental is engaged in training, nature also belongs to educational institutions, then you earn money to start from? In addition to the issue of school qualification, these content are in a state of chaos, officials do not check the people do not investigate, but really to get up, according to the relevant laws of the State will still have problems. As a result, some of the elements mentioned in the muddy water report are at odds with the relevant regulations of China's education and training industry. In addition to the asymmetric information between China and the US, investors in the United States are very normal to have doubts and worries about the new east. And because of the state of chaos, Mr Yu could not respond clearly. Wuqiaobuchengshu, vague vie and vague Chinese education industry policy all fell to the new Oriental. Superimposed, the new Oriental after the listing is like a tightrope walker, parked in mid-air. No solution contradictory body "sincerity to the sex of the Yu" and "The demand for continuous growth of listed companies", the collision of the biggest contradictions. After the "Chinese partner" staged, some of the new Oriental employees who left the company published their own impressions on Weibo. Mr. Zhao's career in New Oriental is just across the new Oriental market, he said, after the listing of the company's requirements for staff work began to become different, will be more financial-oriented. "Before listing, I would rather work overtime to four or five o ' clock, even if all night, my heart is very happy." After the listing, although the income has been improved, but feel that all the work is to complete the report, to meet the audit, the pursuit of profit, and I had to choose the new Oriental starting point is different, so later I left. "Mr Cao (a pseudonym) was listed in New Oriental. In her review, there were few parts of the ideal, and occupations and incomes accounted for the majority. "Leaving the new east is due to personal development, and wages and treatment are getting worse." "At present Mr Cao and friends open their own training school." In her mouth, the new Oriental is a company, and is a corporate culture does not let her satisfied with the company. "Pure is ' you come to class, I give you the lesson pay ', the simple interest relation."A man who declined to be named was also a former New Oriental employee in Hangzhou recalling his meeting with Mr Yu," who was a particularly good person when he went to Hangzhou to inspect the new Oriental and gave all staff a training. That day happened to be my birthday, our headmaster told the Old Yu, the results of his full field to find me, but also volunteered to take a photo with me. "She feels that Mr Yu is not only an educator but also a successful businessman, but at the same time has a particularly rustic feeling." But from the point of view of the pursuit of performance, the new Oriental still make her "uncomfortable" things, such as "renewal rate" and performance linked. "For example, a student in my this on the ' TOEFL 80-class ', the end of this period he felt that the effect is not bad, but also want to go up to 90 points, and then reported a ' 90-class ', so called renewal rate." "She bluntly, this is their own and colleagues are more disgusted with the matter, take to do the performance appraisal, the equivalent of forcing students to continue classes." Ma Yun Vie structure adjustment, the purpose is to let Alipay successfully get domestic payment license, the result of the SEC "panic". Mr Yu's VIE structure, which the industry evaluates as "iron-shouldered", has plunged in share prices. If you see the staff of the new Oriental and Ali different evaluation, do not know the name "handout gas, heavy friendship" of Mr Yu will ask how to feel. Who pays for privatisation? If the new Oriental is privatized, all accounts will not have to be disclosed to investors and will not be affected by the secondary market. Mr Yu can develop education for a long time according to his own will and pace, and can also give "regret listing" an account and kill the birds with one stone. "Companies wishing to take the road to privatization are generally in two situations, one being that the company's share price is low and the time is right, so it is privatized, mainly because it is cheap." The other is to make a major strategic transition, but the open market is not recognized, or the success of the transition is doubtful, the transformation will be a lot of diversion, then choose to take the road to privatization. Huangsong points out that although these companies are privatized, they still want to try to go public again, so investors can benefit. But the situation in new Oriental is different, Mr Yu doesn't want to go public, or he thinks education is not a good place to go on the market. February 21, 2012, Alibaba privatized business-to-business company formally implemented. Jack Ma, the chairman of Alibaba Group, personally posted the message and explained it in detail. There is such a word, "only dare to give up today's success, in order to achieve the development of the upper floor." "Immediately thereafter, the sound of Alibaba's overall re-listing has been heard, and Mr Ma has never denied it." If privatization is not for adjustment, who is willing to pay for the privatisation of new Oriental? Broadway Capital Managing director Yu Xiangdong to the South All reporter analysis, to a certain extent, "privatization" is the shareholder to own enterprise confidence embodiment. Because, privatization is the shareholders to take a sum of money to buy their own company, no matter how much the money, first of all to be taken. With regard to "this money", Huangsong said, according to the conventional practice of new Oriental can be introduced into the privatization of PE funds. But if the privatisation of new Oriental is due to HuminHong "Regret listing", not to be listed again, then the interests of PE how to maintain and add value? "In short, people have lent you money, what do you rely on to pay him back?" "If we do not consider introducing investors, Mr Yu and the new Oriental can also privatize through their own capital." But Huangsong thinks this also has the difficulty ——— only saves money but does not invest in the development, the competitor will not wait for the new Oriental, its market position will be affected, the listed company shareholder benefit equally is not guaranteed. From another point of view, after the "Vie structure" adjustment, when muddy water short, the new Oriental shares plunged, is the best time to privatize. Why did the new Oriental finally not put into action? "It's absurd, you can't ask Peking University to recruit 25% students every year to prove that Beijing University is a success," says Mr Yu, who is the target of 25% to 30% growth per year for listed companies, right? Basically the capital market is such a concept, you marry a woman, you're not going to get rid of this woman, but you have to increase your income by 25% a year, and not because you love her but you are tied. "And the reality is, the effort to complete the report, and staff between simple interests, and performance-linked renewal rate ... The new Oriental had to do this because, as Mr Yu said, "was tied up." "What if the new Oriental is the oligopoly of this industry, tied up and tied up?" But the reality is not the case, the media cited public information that China's education industry 2011-Year output value of 680 billion yuan, new Oriental 2011 revenue of 5 billion yuan, accounted for more than 1%. Huang Bohai, chairman of Bohong Education, said in an interview with reporters in South China that education still has a strong "academic imprint", and that more and more public schools are cooperating with training institutions to set up "international classes" and so on, which will create a great challenge to the non-academic education in New Oriental. In Tang Jun, senior vice President of excellence in education, although the new Oriental leadership in China's private training industry has not been able to shake, but with learning and thinking, Zheng Bao, Hongcheng, learning and other educational institutions to the United States listed, the gap is gradually narrowing. The new Oriental has to face the challenge from an educational institution with a clear "internet gene". Who can assert that these sparks will not form the prairie fire that subvert the new oriental? "One of the new Oriental founders, Xu Xiaoping, wrote to Mr Yu, praising learning and thinking is" An education company with an internet Heart "," all marketing and Word-of-mouth, is established through the Internet, can be said that all free ", in contrast, the new Oriental put a large number of media advertising, issued a large number of leaflets, And a costly promotional campaign at school. In the case of positive insurance, the public financial results show that the total income of the 2012 is 52.1 million U.S. dollars, while the new Oriental 2013 Q3 A quarter of the revenue of 218.47 million U.S. dollars, two companies in volume, scale is not in the same series. But judging from the key index of the listed companies ' investment value, the current P/E ratio is about 29.05, and the net rate is about 4.176.The current price-to-earnings ratio of new Oriental is about 27.59, and the net rate of the city is about 4.105. The investment value and growth of the ——— are better than the new Oriental. The rise of the network means another possibility: it breaks the traditional classroom uniform model and promotes personalized education better. On the web, each of the student's learning Steps is recorded and a learning test report is generated. By the end of last year, the registered member of the network of 15 million, solar PV (Page view volume) over 10 million, mobile end users reach 15 million. How "Ledge" Xu Xiaoping had so appraised of Mr Yu, "he is absolutely an undead man, a man who cannot be crushed." Every time you think he has come to the brink, it is almost impossible to turn back, but he is often a survivor. "How can Mr Yu be a survivor this time?" he said. "My position on the future of New Oriental, the new Oriental is a content provider, as well as ground educators, I do not do platform (online education)." For example, who does the platform very well, I give you the content. So you do the platform, I'll do the content. We can through the acquisition of the way, through cooperation with others, such as the new Oriental can provide a ground platform, your project to work with me, I put your project at the same time to the new Oriental 700 stores. "New Oriental is to do English, a look at others do math so good, also follow." "If you mention math, you think of A and B, which means you failed." Be sure to know what to do, and you can do only one or two things. "In this context, the new Oriental will be on the ground education in the implementation of diversified integration, small scale, investment dispersed, uncompetitive small and medium-sized educational institutions to integrate into the new Oriental board, to activate the stock." So how many ground teaching points does the new Oriental have to integrate? In the new Oriental 2011, with 433 teaching centers accounted for 1% of the market share, if the new Oriental will expand market share to 30% of the monopoly, the teaching point must be increased by 12,557. After the question, will the financial resources of the new Oriental support the expansion of the tens of thousands of teaching points? The answer is no. Earnings showed that the current assets of the new Oriental total of 980 million U.S. dollars, the capitalization of each network expenditure (including new, maintenance, upgrades) between 1 million-4 million U.S. dollars, rough calculation, the new Oriental has only enough cash to buy hundreds of teaching points. An important reality is that the existing industrial operations in new Oriental and the capital flows from the stock market will not support the flow of capital needed for large-scale expansion. In other words, "in the past, the model of building stores by means of capital market financing has been difficult to continue, which is not only a matter of money, but also the occupation of sites by small and medium brands." If the former is ' siege-swept land ', now is to be transformed into a ' united front ', to use management output, franchising way to achieve light asset-type expansion. "7 days chain Hotel chairman Zheng Nanyan to South all reporters, from this point of view, the return of the city is conducive to flexible operation." Perhaps Mr Yu's "ground levelTaiwan "is to obtain a bigger financing platform ——— development cooperation store investment funds are from the partners, and the new Oriental can also charge a brand management fees for partners. With the huge foundation of the ground education, the new Oriental provides the content to the online education platform business. But from another point of view, if there is no capital boost, the new Oriental will want to bring together the decentralized education institutions, it needs a very strong brand appeal and content research and development capabilities. Therefore, "the content can not be done on their own, must find the world's most advanced technology to engage in, which is why the new Oriental and Cambridge University and other famous universities become strategic partners of the important reasons." Mr Yu said. Thematic planning Liu Wangxiaoxing: Fangnan Xiaoxin intern Wei Lin Hu Yufeng