A deal could give Cognita, which operates the Southbank International School in London's Kensington and Hong Kong's Stamford American School, a valuation of a few billion pounds including debt, two of the people said.
Cognita was valued at 2 billion pounds when Jacob Holdings, the Zurich-based investment firm set up by Klaus Jacobs, agreed to buy a majority stake in 2018. Family offices BDT Capital Partners and Sofina took minority stakes in 2019.
The owners are working with Bank of America on the sale with an auction expected to launch next month, two of the people said.
The sources cautioned that a deal is not certain and subject to market conditions, asking not to be identified because the matter is confidential.
Officials from Jacob Holdings, Cognita and Bank of America declined to comment. BDT Capital Partners and Sofina did not respond to requests for comment.
The education sector is drawing interest as investors look to deploy capital into higher quality assets with long-term revenue visibility and stable profits.
Private equity and sovereign wealth funds are looking at Cognita, the first person said, while infrastructure funds could be drawn to the steady revenue streams driven by long-term student enrolment contracts.
The owners of UK-based Nord Anglia Education have selected banks to advise on an exit, which could value the business at up to $15 billion, according to a Bloomberg report. Meanwhile, Brookfield Asset Management Ltd. is in talks to invest in Dubai-based GEMS Education, one of the world's largest private school operators, according to other media reports.
Cognita is targeting 2024 earnings before interest, tax, depreciation and amortisation (EBITDA) of more than 200 million pounds this year, the first two people said. It expanded in the Middle East earlier this year by buying Dasman Bilingual School, adding 3,600 additional students.
The group could be worth more than 20 times its EBITDA or 4 billion pounds based on valuations in the sector prior to the pandemic, one of the people said.
However, an industry consultant cautioned there is uncertainty over how much school chains could sell for currently given higher interest rates, the cost of debt and the possibility of the opposition Labour Party charging VAT on UK school fees should they win an election due this year.
As chains have become bigger, the growth challenge for new investors is larger, requiring long-term capital at an even higher scale, he added.
($1 = 0.7881 pounds)
(Reporting by Amy-Jo Crowley; Editing by Kirsten Donovan)
By Amy-Jo Crowley
