Baring PE Asia tables buyout offer for China’s Ambow Education

BPEA has offered to pay $1.46 for each American Depository Share, which represents a 44.5% premium over the March 14 closing price. It will finance the purchase through equity alone, principally drawn from The Baring Asia Private Equity Fund V, a $2.46 billion vehicle that closed in 2011.

"The company is facing difficult challenges in the current market that we believe can be better addressed as a private company without the pressures of being publicly listed in the US. In this effort, we would welcome the ongoing participation of class B shareholders in the company after completion of the acquisition," Jean Eric Salata, BPEA's CEO, said in a statement. "We also believe that our support will give employees a strong incentive to continue their careers with the company."

Class B shareholders are invited to remain as shareholders in Ambow by rolling over their equity into BPEA's acquisition vehicle.

BPEA currently controls 10% of the company, having invested $50 million in October 2011. According to Ambow's most recent annual report, Avenue Capital was the largest shareholder with 14.6%, followed by CEO and founder Jin Huang on 10.8%, BPEA on 9.1%, Actis on 8.8%, and Macquarie on 7.8%.

Under the terms of BPEA's investment, an affiliate of the private equity firm would receive a minimum return on the capital injected into Ambow after which it would share the returns with Huang.

Ambow was founded in 2000 and listed on the New York Stock Exchange in August 2010. Its primary business is providing tutoring services and test preparation - online and offline - to Chinese students sitting high school and university entrance examinations. It also offers career enhancement training to recent graduates and those in further education.

As of December 2011, the company had 150 tutoring centers, five K-12 schools, 25 career enhancement centers, two career enhancement campuses and one college.

Ambow posted a net income of RMB16.2 million ($2.6 million) in 2011, down from RMB211 .7 million in 2010 and RMB138 million in 2009. Revenues more than doubled over the two-year period to RMB1.3 billion but operating expenses jumped 166% - mainly sales and marketing and administration costs - to RMB748.2 million.

Between April 2010 and November 2012, a total of 49 take-private transactions were announced, according to Roth Capital Partners, with 19 reaching a close, four terminated and 26 in process. The last 12 months have seen significant activity: 10 deals were underway at the start of 2012, rising to 20 by the end of it.

Five private-equity backed deals have closed and AVCJ has records of 14 still in progress, nine of which were announced from the second half of 2012 onwards. Seven of these have received board approval. Less than a week ago, Hony Capital announced it is backing a $505 million management buyout of Chinese drug developer Simcere Pharmaceutical Group.

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