School chain operator Zee Learn Ltd, part of media baron Subash Chandra-led Essel Group, will take control of education services company MT Educare Ltd in possibly the biggest acquisition in India's offline education sector.
Zee Learn has signed a pact to acquire a 44.53% stake in MT Educare from its promoters, including Mahesh Raghu Shetty, for Rs 200 crore ($31.3 million), the two companies said in separate stock-exchange filings on Thursday. MT Educare will issue preferential shares at Rs 62.57 apiece to Zee Learn for this leg of the transaction.
Zee Learn has also made an open offer to public shareholders of MT Educare to buy an additional stake of up to 26% as per regulatory requirements. The open offer price is Rs 72.76 apiece. Zee Learn will spend as much as Rs 135.79 crore to buy shares in the open offer.
Shares of MT Educare rose above Rs 73 apiece on the BSE in afternoon trading, before paring the gains to trade around Rs 71. Zee Learn shares were around 0.6% higher while the benchmark Sensex was up 0.7% in afternoon trade.
The acquisition is aligned with Zee's strategy to increase its footprint across segments in the education sector and consolidate its digital offerings, Zee Learn CEO Debshankar Mukhopadhyay said.
He added that this acquisition will strengthen Zee's pre-schools and K12 offerings through Kidzee and Mount Litera Zee Schools, respectively, and will mark its entry into the high-growth ed-tech market through Robomate and test preparation through MT Educare brands Mahesh Tutorials and Lakshya.
MT Educare, which was listed on the stock exchanges in April 2012, caters to students from class IX to those appearing for engineering and medical entrance exams, chartered accountancy and business administration.
According to its site, the company has over 260 centres spread across 135 locations nationwide, with a faculty strength of more than 1,100 teachers.
The company posted net sales of Rs 248 crore for 2016-17, up a tad from Rs 243 crore the year before. However, its net profit declined to Rs 10 crore from Rs 29 crore.
Last year, MT Educare had explored a potential merger or acquisition with Hyderabad-based NSPIRA Management Services Pvt. Ltd but those discussions likely fell through.
MT Educare had received private equity investments in the past and still has some PE firms, including Kitara Capital, as shareholders.
Helix Investment was its earliest investor but has now fully exited. In 2014, Abu Dhabi Investment Authority, the sovereign wealth fund of the emirate of Abu Dhabi, had picked up a 1% stake in the company. BanyanTree Growth Capital and financial services firm Avendus’ public markets-focussed PE fund had also invested.
Zee Learn had in the past made an attempt to acquire Mumbai-based Tree House Education & Accessories Ltd, which runs preschool chain Tree House. It ultimately scrapped the deal, citing media reports that said the latter was closing down ‘hundreds’ of its playgroup centres as well as the latter’s worsening financials.
Other acquisitions in the education sector include school chain EuroKids International Pvt. Ltd buying Kangaroo Kids Education Ltd last May.