Laureate Education said it agreed to a management-led buyout for about $3.1 billion in cash from an investor group that includes its chairman, private equity firm Kohlberg Kravis Roberts and hedge fund SAC Capital.
Laureate , which offers career-oriented undergraduate and graduate programs through online programs and universities in Latin America, Europe and Asia, said it would receive $60.50 a share in cash -- an 11% premium to the company's closing stock price of $54.41 on Friday.
Based on Laureate's 51.4 million shares outstanding as of end-October, the deal is valued at $3.1 billion. Including debt, the deal totals $3.8 billion.
A special committee of Laureate's directors recommended the deal, which its board approved unanimously. The deal is expected to close at the end of the second quarter, the company said.
Other investors in the buyout group include Citigroup Private Equity, SPG Partners, Bregal Investments, Caisse de depot et placement du Quebec, Sterling Capital, Makena Capital, Torreal S.A. and Southern Cross Capital.
Private equity firms buy and sell companies, borrowing most of the money through their targets to finance deals. So-called buyout firms seek undervalued companies with strong cash flows, because they need the cash to pay down the borrowed debt.
Laureate Chairman and Chief Executive Douglas Becker first approached Laureate's board in September with a conditional proposal, the company said. A special committee of independent directors set up to consider the offer authorized Becker to begin talks with other potential financial partners to secure a higher offer. Becker later presented three other offers to the board, the company said.
Management-led buyout offers, or deals in which chief executives and/or other top officers are among the buyers and plan to stay in control of the company, are on the upswing, fueled in part by the amount of private equity money available.
Executives usually back such buyouts as a way to grow the business in private and focus on long-term goals, free of Wall Street's short-term pressures. These deals also invite scrutiny because the company is pressed to evaluate the best offer, even as its management is the one presenting the bid.
Laureate said the $60.50 per share represents a multiple of 33.8 times Laureate's trailing 12 month earnings per share from continuing operations.
The agreement includes a "go shop" provision, which allows the special committee to solicit and evaluate superior proposals over the next 45 days. There is no assurance that the "go shop" provision will result in a higher offer, the company said.
The equity investment for the transaction will be contributed by the investors, including Becker, and debt financing will be provided by Citigroup and Goldman Sachs.
The deal includes a $55 million break-up fee, a source familiar with the situation told Reuters.
Morgan Stanley and Merrill Lynch served as financial advisors to the special committee. Citigroup and Goldman Sachs served as financial advisors to Becker and the investor group.