Aakash Founders To Terminate Share Swap Agreement With BYJU’S

The Chaudhry family, the founder of Aakash Educational Services Limited (AESL), has reportedly told BYJU’S that it will terminate the merger and fallback agreement involving a share swap.

According to a report by The Morning Context, the Chaudhrys will not swap their remaining 18% stake in Aakash for equity in the edtech giant. At the same time, Blackstone, the US-based private equity (PE) firm, has also delayed moving ahead with the share swap. Blackstone still holds a 12% equity stake in Aakash.

However, sources close to BYJU’S told Inc42 that Aakash is legally bound to complete the share swap, as part of the agreement that saw the edtech decacorn acquire the test prep chain in April 2021.

A BYJU’S spokesperson declined to comment on the matter when approached by Inc42.

The move comes after BYJU’S reportedly sent a legal notice to the founders of the test prep chain due to their alleged resistance to complete the share swap.

The development also comes amid the ongoing boardroom tussle at the storied test prep chain, as its lender Davidson Kempner accused Aakash of breaching a loan covenant and asked for repayment of the money utilised from the $250 Mn credit line it extended.

As per media reports, Davidson Kempner has taken control of Aakash and restructured its board of directors. While Davidson Kempner refused to confirm this development, BYJU’S rejected these reports.

“This is completely incorrect. There is no allegation of financial misconduct, and DK has not taken over the company. We have noted certain fictional allegations and request you to refrain from writing the same,” a spokesperson for BYJU’S said on July 31.

Separately, two independent directors of Aakash tendered their resignations earlier in July, though it was widely reported that the two directors – Amit Khansaheb and Vishruta Kaul of the legal firm Shardul Amarchand Mangaldas & Co – were appointed to ensure a smooth transition after the BYJU’S-Aakash merger.

The uncertainty surrounding Aakash will likely cause a headache or two at BYJU’S since the test prep vertical has been a silver lining for the edtech giant.

BYJU’S-Aakash: A Difficult Marriage

BYJU’S acquired Aakash in April 2021 for an amount close to $1 Bn. As part of the acquisition agreement, the Chaudhry family sold Aakash to BYJU’S parent company Think & Learn Pvt Ltd (TLPL)  for a combination of cash and shares. 

The share swap is meant to complete this deal.

However, due to delays in the approval for the proposed merger by the National Company Law Tribunal (NCLT), TLPL invoked an unconditional fallback agreement and issued a notice to Chaudhrys, requesting the execution of the swap deal.

BYJU’S is looking to end the share swap issue soon as it is looking at an $80 Mn cash injection from Manipal Group chairman Ranjan Pai. Pai will acquire a part of BYJU’S CEO Byju Raveendran’s stake in Aakash.

However, the Chaudhry family and Blackstone have reportedly cited a breach of terms, including a delay in furnishing the FY22 audited financials of BYJU’S parent firm for the refusal, making it yet another case of delayed financial reporting haunting the edtech giant.

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