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Education First in exclusive talks to sell China business to Permira: sources

02/17/2020 | 07:54pm EDT

Swiss language tutor Education First (EF) has entered exclusive talks with global private equity firm Permira to sell its China operations, in a deal valuing the business at $1.6 billion, said two people with direct knowledge of the matter.

EF, owned by founder Bertil Hult and his family, hired JPMorgan Chase & Co to help sell the mainly children-focused business last year, coming as multinational firms re-evaluate their China operations where economic growth is slowing.

The language tutor achieved about $100 million in earnings before interest, tax, depreciation and amortization (EBITDA) last year at its China business, said one of the people.

An enterprise value (EV) of $1.6 billion would yield an EV/EBITDA multiple - a metric investors use to help determine a company's value - of 16 times following a second round of bids, from nearly 20 times after the first round when EF aimed for a value of $2 billion, the people said.

EF invited Permira to participate in the second round last month alongside private equity peers including Hillhouse Capital, Boyu Capital, CVC Capital Partners and General Atlantic, said the people.

Permira, which in October closed its latest global buyout fund of $12 billion, is in talks with several banks for a loan to help finance the potential acquisition, said one of the people.

The private equity firm plans to wait for EF China's financial reports for the first quarter of 2020 to re-negotiate the price, the person said.

EF, Permira and JPMorgan declined to comment on the deal. Boyu could not be immediately reached for comment. Hillhouse, CVC and General Atlantic did not respond to requests for comment. The people declined to be identified as the information was confidential.

EF, on its website, said it opened its first China school in Shanghai in 1993 and expanded to over 300 teaching centers across 60 Chinese cities, offering language courses for children and adults as well as study tours.

The potential sale comes at a time when a fast-spreading conoravirus, which has claimed over 1,700 lives, has forced local governments in China to order the closure of schools and non-essential companies until further notice.

"We are leading the drive to provide online learning at an unprecedented speed and scale so that our students can continue their studies with our teachers in real time during this special period," EF told Reuters. It said 150,000 students had migrated from offline to online since mid-January.

China makes up a significant portion of EF's global revenue, with the bulk coming from children's language learning programs, Reuters previously reported.

(This story is refiled to correct the first paragraph to clarify Education First is Switzerland-based, not a Swiss firm)

By Kane Wu and Julie Zhu


ę Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
JPMORGAN CHASE & CO. -1.52% 155.18 Delayed Quote.22.12%
SWISS RE LTD 0.30% 85.66 Delayed Quote.2.42%
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