HSB Capital Partners Calls Upon Board of Legacy Education Alliance, Inc. and Rich Dad Operating Company to Explore a Mutually Beneficial Business Combination
20 Nov, 2019, 09:00 ET
SANTA ANA, Calif., Nov. 20, 2019 /PRNewswire/ -- HSB Capital Partners, L.P. (together with its affiliates, "HSB"), a significant stockholder of Legacy Education Alliance, Inc. (OTC: LEAI) (the "Company" or "LEAI"), beneficially owning approximately 3% of LEAI's outstanding common stock, today called upon both the Board of Directors of LEAI (the "Board") and Rich Dad Operating Company, LLC ("Rich Dad"), to explore a possible business combination, including the option of giving Rich Dad a controlling 51% share position in the Company, in order for LEAI to continue to be able to market its suite of products and services under the Rich Dad® Education brand worldwide.
HSB invested in LEAI due to its belief that the Company showed immense potential and promise with opportunities to increase stockholder value. HSB found the material being taught through the Company's various course offerings and the knowledge of its instructors to be immensely valuable and credits LEAI management for creating products that provide real value to its students. The Board and management should be lauded for their efforts in becoming one of the world's most well-respected and trusted leaders in educational services.
Despite HSB's confidence in LEAI's Board and management, HSB was deeply disappointed to learn that the Company's license agreement with Rich Dad would not be renewed beyond September 30, 2019. LEAI's business relied primarily on its license of the Rich Dad® Education brand and related marks. The Rich Dad® Education real estate and financial market course offerings accounted for 74% and 72% of the Company's total revenues in 2018 and 2017, respectively. Given the materiality of the Rich Dad® Education brand to LEAI, HSB believes the Board should immediately commence discussions with Rich Dad to explore a possible business combination.
The clear advantage to LEAI to pursue a business combination with Rich Dad would be the receipt of a perpetual, exclusive license to the Rich Dad® Education brand. A business combination would also create significant value to Rich Dad. Some of the advantages include:
- Historical Synergies - In the more than 10 years that LEAI held an exclusive license to the Rich Dad® Education brand, LEAI developed a structure of in-person education workshops that allowed the brand to grow and thrive. LEAI has the infrastructure in place to continue building and marketing the Rich Dad® Education brand so that it can achieve its stated mission: to elevate the financial well-being of people from all walks of life.
- Revenue Generation – LEAI has historically generated about $70 million in annual revenue through its Rich Dad license. Such revenue should increase following a business combination allowing LEAI to invest more resources towards the brand and marketing, a strategy that was suboptimal under the previous temporary licensing arrangement. As a controlling shareholder in LEAI, Rich Dad would immediately derive meaningful revenue from a business combination.
- Increased market capitalization for LEAI. A business combination could significantly increase LEAI's valuation from a current market capitalization of approximately $2.1 million to potentially over $90 million, if one were to apply a 1x revenue multiple to LEAI's 2018 annual revenue of approximately $93.4 million. At a potential market valuation of over $90 million, Rich Dad and current LEAI shareholders would immediately realize value - the per share value would potentially increase from today's share price of $0.09 to $0.53, an increase of over 500% to LEAI shareholders.
- Cost Savings. A business combination can achieve significant cost savings by not only consolidating corporate offices, but also their management teams. LEAI currently owns its 40,000 square foot corporate headquarters in Cape Coral Florida. Rich Dad could eliminate its lease in Arizona and consolidate its headquarters with LEAI, resulting in significant cost savings. With a controlling interest in LEAI, Rich Dad could assert meaningful and constructive influence on management and the Company's day-to-day operations for the benefit of all stockholders.
HSB is confident that the continuation of this relationship will produce significant results for both parties as well as help drive stockholder value. As such, HSB hopes that the Board and Rich Dad will immediately engage in discussions to explore a business combination.
About HSB Capital
HSB Capital Partners, L.P. is an Irvine-based investment firm and hedge fund informed by value investing, with no management fees below 4% annual return. Their approach to identifying undervalued companies, combined with a meaningful ownership stake, has enabled them to drive stockholder value. Learn more at www.hsbcapitalpartners.com.
Haren Bhakta, Managing Member
HSB Capital Partners, L.P.
SOURCE HSB Capital Partners, L.P.
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