Jan. 30, 2007

Another Move From Public to Private

Laureate Education, Inc. plans to become the latest publicly traded for-profit provider of higher education to enter the potentially friendlier confines of the private markets.

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The Baltimore-based company, which operates the online-only Walden University in the United States but has a large and expanding international operation, announced Sunday that its board had agreed to sell to an investor group that is led by its chairman and chief executive officer, Douglas L. Becker, and includes some of the country’s major private equity firms.

The deal is valued at $3.8 billion, which tops the $3.4 billion value of the sale of Education Management Corp. last March. In June, the smallest of the other 10 publicly traded higher education companies, Concorde Career Colleges, announced that it, too, would be sold.

The price tag for Laureate, which educates 240,000 students in 15 countries, most of whom are adults, could conceivably climb even higher. In their announcement, company officials said that Laureate’s Board of Directors had endorsed the offer from Becker and the 10 firms, valued at $60.50 a share, over two other offers.

But the company also said that the agreement includes a provision that will allow a committee of board members — in cooperation with Becker and Laureate’s managers — to solicit and consider “superior proposals” for 45 days. The committee “intends to actively solicity superior proposals during this period,” the company’s statement said. But “[t]here is no assurance that the ‘go shop’ provision will result in a higher offer.”

Financial analysts who follow the higher education market said they believed that going private could give Laureate more latitude to pursue an aggressive strategy of expansion, at a time in which Wall Street may be more skeptical of such growth amid fears. Laureate’s November announcement that it was establishing its first partnership with a university in Turkey is indicative of its perceived thirst to expand. Company officials have long had their eye on China, for instance, but have not extended their reach there yet.

Analysts also viewed the Laureate announcement as both reflective of the recent boomlet of deals in which private equity firms have purchased publicly traded postsecondary companies, and as likely to accelerate the trend.

Jeff Silber, a research analyst at BMO Capital Markets, said that “companies with a cleaner regulatory record appear to be the most likely takeout candidates” because of the oversight that such deals receive within the U.S. Department of Education. BMO cited several companies that fell into that category, including Capella Education, DeVry, ITT Educational Services, Lincoln Educational Services, Strayer Education and Universal Technical Institute.

— Doug Lederman

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