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Bridgepoint buys Cambridge Education from Palamon for $304 mln

Kylie MacLellan
Wednesday, 4 Dec 2013 | 6:20 AM ET

LONDON, Dec 4 (Reuters) - European private equity firm Bridgepoint has agreed to buy pre-university training provider Cambridge Education Group (CEG) from Palamon Capital Partners in a deal worth 185 million pounds ($304 million).

Bridgepoint said on Wednesday the international student market offered long-term sustainable growth, with increasing demand for UK and U.S. university degrees from emerging middle classes in high growth economies such as China, Brazil and Russia.

The British government estimates the UK education export industry alone is worth 17.5 billion pounds a year.

"Our investment will provide the team with additional financial capacity and reach to accelerate its push further into international markets and realise its ambitions in a growing market," said Chris Busby, Bridgepoint's partner responsible for investment in the UK.

London-based Palamon, which invests in service businesses and bought a majority stake in CEG in 2007, said the sale would generate a return on investment of 14.6 times and a capital gain of 141 million pounds.

Set up in 1952, CEG provides preparatory education to international students from more than 95 countries planning to attend universities in the United Kingdom, continental Europe and the United States.

CEG's revenues have grown five-fold since 2007, to an estimated 90 million pounds for the academic year 2013-14.

"When you pick an investment theme that has that kind of wind to its back you have a real opportunity to grow a business at these rates purely organically," Palamon managing partner Louis Elson told Reuters.

"The market was there, the students were there and the universities were really interested in the product. The company began a significant international expansion ... It is ready for its next phase of growth."

Elson said Palamon was seeing a lot of new deals but the market was patchy with many transactions not happening due to uncertainty over the outlook for those businesses' models in a quickly changing world. It is also focused on continuing to exit its current portfolio of investments.

The enterprise value of 185 million pounds values CEG at a multiple of 11 times current-year forecast earnings before interest, tax, depreciation and amortisation (EBITDA).

CEG's management will retain a stake of around 20 percent in the business.