
Bain's China education business set for NASDAQ IPO
Bain Capital Private Equity-owned Rise Education, a China-based company that provides after-school English teaching and tutoring services, has filed to list on NASDAQ.
The company’s filing does not indicate the size or pricing of the offering, or whether its owner will sell any shares. Bain paid $140 million for a majority stake in the business in 2013. The GP initially looked at the company as a potential growth investment in 2012 but it turned into a control deal following a disagreement between the founders.
Rise opened its first learning center in Beijing in 2007 and over the next six years entered Shanghai, Guangzhou, and Wuxi. As of June 2014, the company offered language programs for children of pre-kindergarten age through year six, with 34 directly-owned schools in Beijing, Shanghai, and Guangzhou. A further 126 schools were run by franchisees.
As of June 2017, Rise had 246 facilities across 80 cities. It directly owned 56 schools in tier-one cities: 30 in Beijing, 12 in Shanghai, seven in Guangzhou, two in Wuxi and five in Shenzhen. There were also 190 franchisee-run centers in lower-tier cities. The directly-owned schools alone had 26,600 student enrollments for the six months ended June and 1,315 teachers.
Rise now runs programs aimed at students aged 3-18. It pursues a subject-based approach to learning whereby students not only participate in language classes but also receive English-language instruction in subjects such as math, natural science, and social science.
The company claims to be the third-largest junior English language training (ELT) provider nationwide and the second-largest in the premium segment, based on gross billings for 2016. According to Frost & Sullivan, Rise’s market share in the premium segment – which includes programs with annual fees above RMB16,000 ($2,400) in tier-one cities – is 10.7%.
The industry is highly fragmented, with the top 10 providers only accounting for 6.7% of the market. Consolidation is expected to accompany growth. Frost & Sullivan projects that revenue in China’s junior ELT market will reach RMB239.8 billion by 2021, up from RMB85.2 billion last year. Over the same period, the premium ELT market is set to expand from RMB8.1 billion to RMB22.8 billion.
Rise posted RMB711 million in revenue last year, up from RMB529.5 million in 2015, while EBITDA rose from RMB40.8 million to RMB142.3 million. The company swung from a net loss of RMB31.7 million in 2015 to a net profit of RMB50.8 million in 2016. Bain received RMB6.2 million in consulting fees from Rise in each of those years.
Rise has also entered into entrustment loan agreements with another Bain portfolio company, Lionbridge Financial Leasing. A combined RMB480 million was loaned in 2015 and 2016, all of which has been repaid, while RMB140 million from the first six months of 2017 is still outstanding.
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