Chinacast Education (NASDAQ:CAST)

SHANGHAI, April 2, 2012 /PRNewswire-Asia/ -- Ron Chan, ex Chairman and CEO of ChinaCast Education Corporation (NASDAQ: CAST) has today resigned from the board and issued the following letter to the shareholders:

Dear Shareholders,

I have resigned from the Board of ChinaCast Education Corp. today. I have come to this decision because of serious disagreements that I have with the group of directors who recently has come to control the Board and the Company.

After the election of Ned Sherwood's slate of directors at the annual meeting in January of this year, Mr. Sherwood, and persons acting in concert with him, which I believe to include Daniel Tseung, Derek Fang, funds managed by Fir Tree Partners, and other shareholders, acting in concert and in furtherance of a pre-existing plan, sought to and did take control of the Company.  They then acted to promote their own interests at the expense of the Company and its other shareholders.

For example, Mr. Sherwood's group pushed the Company for a settlement of $2.3 million with Ned Sherwood on his bogus claims against the management and the Company. When Michael Santos and I strongly objected to this settlement, we were essentially pushed out of the Company, notwithstanding our years of loyal and valuable service.  Although I remained on the Board, important decisions were made without any prior communication with me or with the senior management.  Without any proper authorization, Mr. Sherwood, purporting to represent the Board, instructed PRC management to take instruction directly from the Board (i.e. from Mr. Sherwood) and not from the executives (i.e. me). Without proper authorization, Derek Feng announced the removal of Mr. XY Jiang as President, China. Mr. Jiang has been with the Company for 11 years and has been a trusted employee and a partner holding 40% of the VIE company, CCLX.  I have been told that new Company management has been threatening Company employees and creating a hostile and terrifying atmosphere, rendering the Company largely dysfunctional.

In addition, I have personally been threatened by Mr. Sherwood's group with threats of bogus lawsuits, claiming that I have stolen Company property, have sabotaged efforts to complete the Company's filings in a timely manner, and have engaged in insider trading.

Not only are all of these allegations untrue, those who make them know they are untrue and they are doing so, I believe, to distract attention from their own conduct that is severely hurting the Company.  I have retained no Company property; I have done nothing to interfere with the filings; I have always acted in the best interests of the Company and will continue to do so; I have not sold a share of stock of the Company; and I have revealed no non-public information about the Company to anyone.  These heavy handed tactics, based on nothing but falsehoods and apparent desires to promote self-interests, however, seem, unfortunately, to be the way the new Board conducts its business.

This is not the Company that I worked hard to create and grow.  I fear that the direction the Sherwood-led Board is going in will ruin the Company.  Simply put, the current Board and the new executives do not have the experience to run the business.  For those reasons, I am resigning from the Board.

Sincerely,
Ron Chan

January 4, 2012

Dear Shareholders of ChinaCast Education:

By now you should have received our proxy supplement announcing that the Company's annual meeting has been adjourned to January 10, 2012 at 9:00 a.m. Beijing Standard Time (local time), which is equivalent to 8:00 p.m. EST on Monday, January 9, 2012.

DO NOT RETURN ANY PROXY CARD SENT BY NED SHERWOOD

Ned Sherwood, a current director that the Nominating Committee of your Board of Directors determined was unsuitable to continue serving on the Board, is now sending out his own proxy material and green proxy card in an attempt to get you to reinstate him to his position on your Board of Directors, as well as elect his two hand-picked nominees. We urge you to discard any proxy materials sent to you by Ned Sherwood. Show your support for your Board and management and vote the BLUE proxy card today by telephone or Internet.

A Reality Check

It is the current management team and the Board members on the Company's slate of nominees that have created all value for all CAST shareholders so far, including:

• Securing the necessary education and telecom licenses with the appropriate PRC government regulatory authorities;
• Building one of the largest private, post-secondary companies in China with over 35,000 on-campus students at our 3 universities and 145,000 distance learning students using our nationwide broadband satellite network;
• Growing revenue at an annual compound rate of 40% to $97 million to $99 million in FY2011;
• Growing adjusted net income at an annual compound rate of 52% to $30 million to $32 million in FY2011; and
• Growing total assets to over $471 million (including over 200 acres of real estate) and shareholder equity to $292 million or $5.90 book value per share.

Full Letter

Ned Sherwood, Major Stockholder of ChinaCast Education Corporation, Issues Open Letter to Stockholders

-Urges ChinaCast Stockholders To Vote For His Three Highly Qualified Nominees On The Green Proxy Card Today

NEW YORK-- Dec 27, 2011. (BUSINESS WIRE)--Ned Sherwood, a major stockholder of ChinaCast Education Corporation (Nasdaq GS: CAST), today issued the following letter to all stockholders of the Company:

Dear Fellow ChinaCast Stockholders:

As you may be aware, the Delaware Court of Chancery1 has forced ChinaCast to delay the Annual Stockholders Meeting until January 9, 2012, at 8:00 p.m. EST in order for all stockholders to have adequate time to make a fair and reasoned determination of who should be elected to the Board of CAST. You deserve to have independent voices in the boardroom looking out for your best interests. I urge you to vote FOR my highly qualified independent nominees—Ned Sherwood, Derek Feng and Daniel Tseung—on the GREEN proxy card today.

As a significant stockholder and current member of CAST’s Board of Directors, I wish to state that my major goal is to assure that CAST undergoes, under the direction of a truly independent Special Committee, a full and complete, unbiased process to maximize stockholder value.

I continue to be convinced that CAST has an excellent business model operated by superior Mainland Chinese management and employees. Let me be clear, I do not wish to interfere with the Company’s day-to-day operations in any way. I do, however, have serious concerns with the actions and strategic decisions made by certain of the current Board members.

I am not seeking control of the Company’s Board. Rather, I am seeking to elect three (including myself) of the six Board members at the Annual Stockholders Meeting on January 9th to assure that Board actions are executed in the proper manner at this critical time in CAST’s history. I believe that my three nominees will ensure that the interests of the stockholders, the true owners of ChinaCast, are vigorously represented in the boardroom by truly independent representatives.

Obviously, as a major stockholder, I want the process currently begun by the Special Committee to be run by the most experienced, independent, and professional individuals on our Board (or our Board as constituted after January 9th). I question the current composition of the Special Committee. While both Paul Weiss and Credit Suisse, the outside advisors to the Special Committee, are excellent firms, it is ultimately the Special Committee, and not its advisors, that will determine the best course of action for CAST. This is not a process that can simply be outsourced to a law firm and investment bank.

The Special Committee currently consists of Justin Tang, Stephen Markscheid, and Hope Ni, and it excludes the Board’s two most experienced directors in investment and mergers and acquisition matters—Tseung and me. Mr. Tang, who has been a Director of CAST since 2007 and, to my knowledge, has never voted against any Board resolution, is, in my opinion, a proxy for Ron Chan. The other two committee members, Markscheid and Ni, were never elected to the Company’s Board by stockholders. Ask yourself whether these are the committee members you would select to explore and evaluate strategic alternatives?

I believe that the nominees on the GREEN proxy card are more qualified and will represent your interests better than any of the current members of the Special Committee.

I am sure you will agree once you compare the backgrounds of the three members of the Special Committee with those of Tseung and me, the Board members who were not chosen for the Special Committee.

Tseung has been affiliated with CAST since its founding in 1999. He has over 16 years of experience as a professional investor. From 2000 until 2010, Tseung served as Managing Director of Sun Hung Kai Properties Direct Investments Ltd., the private equity division Sun Hung Kai Properties, one of the largest market-capitalization, publicly-traded companies in Hong Kong. He is an experienced investment professional who knows ChinaCast well.

I have more than 26 years of mergers and acquisitions and private equity experience as the founder of ZS FUND L.P. (“ZS”). Prior to the founding of ZS, I had 11 years of experience in divestitures for W.R. Grace and as a partner of AEA Investors, Inc., an early private equity firm.

If our slate of three directors is elected to the Board, and if certain members of our slate are selected to be on the Special Committee, we plan to do the following:

1) Review the Company’s official projections that have been submitted to the Special Committee. As a director, I have been requesting two to three-year rolling projections at our regularly scheduled Board meetings, to no avail. Since future projections are a key determinant of value, I would like the Special Committee to review the Company’s projections carefully, and with the assistance of its financial advisor, come up with an independent “unbiased projections” for CAST’s future prospects.

2) I want to confirm that the advisors to the Special Committee have been instructed to conduct the broadest and widest process possible (encompassing both strategic and financial buyers). I have been very concerned about references in the Company’s recent open letters to “the deal” as opposed to “the process.”

3) I have also been troubled by Chan’s statement that threatened an exodus of management if our slate were elected. As you know, this threat, which I believe constitutes a breach of fiduciary duty, resulted in our decision to reduce our slate of director nominees from six candidates to three candidates. As such, it is certain that three nominees from the Company’s slate will be re-elected whether you vote for us or not.

As a further precaution, and as an encouragement to strategic buyers to bid for CAST, I plan to suggest, as Chairman of the Compensation Committee, that CAST immediately adopt a generous “Retention Bonus Plan” for the excellent Mainland Chinese management team, including, but not limited to, Li Wei, Xy Jiang, Jim Ma, Donald Gardner, and others. My proposal will include a significant one-time extra bonus payment to each key Mainland Chinese employee who, if a change of control transaction occurs, agrees to remain in the employ of the acquiring company for at least two years post-closing.

Additionally, by including Feng on our slate, I believe that we are further protecting value for all stockholders. Feng was born and educated in Mainland China, advanced his career in the United States at blue-chip companies such as GE, and spent five years as a senior executive at Knowledge Universe, one of the largest education holding companies with more than 40,000 employees globally. In my opinion, his leadership experience and education industry expertise will prove to be a very valuable resource to both management and the CAST Board.

Now is the time for ChinaCast stockholders to protect their best interests by electing three highly-qualified, independent nominees who are committed to maximizing the value of your investment. Please vote your GREEN proxy card today.

If you have any questions or need assistance in voting your GREEN proxy card, please call the firm assisting in the solicitation of proxies, Innisfree M&A Incorporated, toll-free at (888) 750-5834 (banks and brokers call collect at (212) 750-5833)).

Thank you for your support,

Ned Sherwood

Dear Fellow Stockholders:

On behalf of myself and my affiliated funds, we write to respond to Mr. Chan’s December 14, 2011 open letter to stockholders. To begin with, I want to address the Mainland China management team. All of you are doing an excellent job operating and growing CAST on a day-to-day basis. As a Board member of CAST for the past two years, I have witnessed first-hand the outstanding work you do, and I have particularly enjoyed attending the past two educational conferences in Guilin and Wuhan. I am committed to working with our other Board members to keep our excellent operating management teams in place and helping them grow our Company. My own firm, ZS Fund L.P., prides itself on being associated with excellent operating management teams and helping them grow their companies. Our goal is to expand and continue to develop CAST’s existing universities to continue to develop them into “world class” educational institutions. We support your efforts wholeheartedly.

With regard to the actions of certain members of the current top management and the Board’s actions over the past year, we have different concerns, questions and comments. Many of these questions and concerns were addressed in my previous open letters to stockholders, especially my December 12, 2011 letter, which has resulted in stockholders representing a significant percentage of shares outstanding sending requests to the Company for a short four-week postponement of the Annual Stockholders Meeting, so that all stockholders have adequate time to consider the issues before them. In our view, Mr. Chan has ignored these issues and has failed to adequately explain why he will not allow CAST stockholders an opportunity to fully consider both slates of Board nominees. We strongly believe that the short postponement that many stockholders seek would have no significant adverse effect on the Company.

With respect to more of Mr. Chan’s continued wholly unsubstantiated litany of personal attacks against my character, I have complete confidence that our stockholders will fairly judge me based on facts, not meritless charges, and my unblemished 42-year business career. On issues of substance that are important to you, I will respond.

The most important revelation in the updated letter is Mr. Chan’s statement that “On August 1, 2011, the Board received an unsolicited buyout offer in writing for 100% of the company in an all cash deal at a premium of over 46% to the then current market price of our common stock.” Doing the math is easy, and it is unclear why Mr. Chan was not more forthcoming; the price when calculated per the above description is $7 per share. While Mr. Chan gives you the price, why does he not reveal other terms that are important to CAST stockholders? Did management have involvement in soliciting the so-called “unsolicited” offer, and what would management’s equity position be in the Company post-closing? Why selectively disclose portions of the “offer” including the price but not tell stockholders of other important terms?

Since the Company has approximately 49 million shares outstanding, a $7 price per share translates to a total market value for CAST of approximately $346 million. Focusing only on what Mr. Chan did tell you, I am attaching a simple chart showing what a $7 per share price translates to based on certain objective parameters.

NEW YORK--(BUSINESS WIRE)--Ned Sherwood, a major stockholder of ChinaCast Education Corporation (Nasdaq GS: CAST), today issued the following letter to all stockholders of the Company:

Dear Fellow Stockholders:

On behalf of myself and my affiliated funds, we thank the Company for recently issuing an open letter reiterating its outstanding operating results and accomplishments. As we stated in our December 9 letter to the Board, we take no issue with the management’s operating achievements and we hope that all managers continue to produce stellar results.

We just take issue with the Board’s governance and decisions. I have asked at numerous Board meetings and I ask publicly now:  See full letter

February 8, 2011
 
Dear Shareholders:
 
Happy Chinese New Year of the Rabbit! After a successful 2010, a year in which we made significant progress toward our long-term growth objectives, I would like to update you on the large share trading volume of CAST last week.
 
One factor that may have caused this increase is that our third largest shareholder, DirecTV, recently sold approximately 1.3 million of the 3.0 million shares of our stock they hold (please see the SEC 13G filing dated 2/2/2011, http://cchyy.client.shareholder.com/sec.cfm). As a non-core investment in their portfolio of assets, we view their stock sales as a long-term positive in further expanding our shareholder base and free float. Our management team strongly believes that our Company’s best days are ahead of us, as evidenced by the management team and board of director’s purchase of 1.34 million shares of common stock during the past twelve months, with a total value of $9.54 million.
 
In addition, there is continued volatility in the Chinese small cap market caused by short sellers making allegations against a few U.S.-listed Chinese companies. We have a simple, transparent corporate structure and a straightforward business model. I would highlight the following attributes as reasons why ChinaCast Education Corporation is an easy investment that investors should be confident in:
 
    1. Recurring, service cash business with significant excess demand
    2. Physical assets that grow in value over time
    3. Post-secondary education has high barriers to entry
    4. Management has consistently communicated with investors and hold similar interests as shareholders.

As always, we welcome the opportunity to answer any questions you may have regarding our company. We look forward to seeing many of you at the upcoming conferences in March. Thank you again for your continued support.
 
Regards,
 
Ron Chan Tze Ngon, Chairman and Chief Executive Officer
ChinaCast Education Corporation