Think and Learn Pvt Ltd (TLPL), the parent company of BYJU’S, has taken legal action against the founders of Aakash Educational Services. This action follows the founders’ reported resistance in fulfilling a share swap agreement that was previously agreed upon as part of the sale of Aakash Educational Services Ltd (AESL).
In 2021, Byju’s made a significant acquisition by purchasing a 33-year-old coaching center institution for approximately $940 million, in a combined cash and stock deal. Following the acquisition, Think and Learn Pvt Ltd (TLPL) held a 43 percent stake, while its founder, Byju Raveendran, owned an additional 27 percent. The Chaudhry family members, who are the original owners of Aakash Educational Services, retained around 18 percent ownership in AESL, while Blackstone held the remaining 12 percent.
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The terms of the deal included a planned merger of AESL with TLPL, as this arrangement was deemed more tax-efficient for the Chaudhry family, the sellers in the transaction.
Amidst delays in the anticipated merger process by the National Company Law Tribunal (NCLT), TLPL has taken action by activating the unconditional fallback agreement and serving a notice to the Chaudhry family. The notice urges the Chaudhrys to fulfill the swap deal as agreed upon. According to sources quoted by reports, the minority shareholders, however, have chosen not to exchange their equity holdings in AESL with TLPL, as reported by three sources familiar with the matter.
Approximately 70 percent of the acquisition made in 2021 was conducted in cash, while the remaining portion was intended to be adjusted against the equity of TLPL.
As per sources mentioned in the report, both Blackstone and the Chaudhry family have recently communicated to Byju’s, expressing their refusal to comply with a TLPL notice issued in March. The notice requested the execution of the share swap in accordance with the original agreement.
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Upon fulfilling the share swap obligation, the Chaudhry family’s stake in TLPL would decrease to slightly below one percent.
There are potential implications for the Chaudhrys in the swap deal, as tax authorities could demand payments, including on GST. As a result, the Chaudhrys are reportedly considering a cash payout option instead of proceeding with the swap.