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Aakash Founders Reportedly Terminate Merger and Share Swap Arrangement with BYJU’s

The Chaudhry family, the founders of Aakash Educational Services Limited (AESL), has reportedly informed BYJU’s that the merger and backup arrangement involving a share swap will be terminated.

The Chaudhrys will not exchange their remaining 18% interest in Aakash for ownership in the edtech behemoth, according to The Morning Context. At the same time, Blackstone, a private equity (PE) firm based in the United States, has postponed the share swap. Blackstone continues to own 12% of Aakash.

According to sources close to BYJU’S, Aakash is legally required to conduct the share transfer as part of the arrangement that saw the edtech decacorn acquire the test prep chain in April 2021.

When approached by Inc42, a BYJU official declined to respond.

The move comes after BYJU’S allegedly submitted a legal warning to the test prep chain’s founders due to their claimed refusal to complete the share swap.

The discovery also coincides with the ongoing boardroom squabble at the legendary test prep firm, in which its lender Davidson Kempner accused Aakash of breaching a loan condition and demanded a return of the money spent from the $250 million credit line it implemented.

Davidson Kempner, according to media reports, has seized control of Aakash and reformed its board of directors. While Davidson Kempner declined to corroborate the news, BYJU’s dismissed it.

“This is entirely false. There has been no allegation of financial mismanagement, and DK has not assumed control of the company. “We have noted certain fictitious allegations and request that you refrain from writing them,” a BYJU’S official said on July 31.

Separately, two independent Aakash directors resigned earlier in July, despite widespread speculation that the two directors – Amit Khansaheb and Vishruta Kaul of the legal firm Shardul Amarchand Mangaldas & Co – were appointed to ensure a smooth transition following the BYJU’S-Aakash merger.

The uncertainties surrounding Aakash will most likely give BYJU’S a headache or two, as the test prep vertical has been a silver lining for the edtech behemoth.

BYJU’s paid close to $1 billion for Aakash in April 2021. The Chaudhry family sold Aakash to BYJU’s parent business Think & Learn Pvt Ltd (TLPL) for a combination of cash and shares as part of the acquisition agreement.

This transaction will be completed by a share swap.

However, due to delays in the National Company Law Tribunal’s (NCLT) approval of the proposed merger, TLPL invoked an unconditional backup agreement and issued a notice to Chaudhrys, asking the implementation of the swap contract.

BYJU’S hopes to conclude the share swap offer soon after receiving a $80 million cash injection from Manipal Group chairman Ranjan Pai. Pai would buy a share in Aakash from BYJU CEO Byju Raveendran.

However, the Chaudhry family and Blackstone have reportedly claimed a breach of agreements, including a delay in supplying the FY22 audited financials of BYJU’s parent corporation, as the reason for the denial, adding to the edtech giant’s history of delayed financial reporting.

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