Australia's BGH wins board approval for Navitas deal

The private equity firm – working in conjunction with AustralianSuper and Rod Jones, co-founder and CEO of Navitas – made an offer of A$5.50 per share in October, which was rejected the following month. It has now received endorsement for a bid of A$5.825 per share, to be structured as a scheme of arrangement, according to a filing. This represents a 34% premium to the October 9 closing price.

The parties have entered a period of exclusive due diligence, which elapses on February 18. Navitas shares gained 12.9% on January 15, closing at A$5.53. As of mid-morning trading on January 16, they were trading around the same level.

Board support is subject to several conditions, including the absence of a superior proposal. Notably, the revised offer no longer includes the mandatory requirement that AustralianSuper and Jones vote against any competing bid. If Navitas receives an improved offer from another party and BGH does not match it within an agreed timeframe, they could vote in favor of that offer.

Jones has a 12.6% holding in Navitas and he has agreed to sell half of his shares for cash and roll over the remaining half into the acquisition vehicle. AustralianSuper has a 5.4% interest in the company and plans to vote those shares in favor of the buyout. The superannuation fund is an LP in BGH’s fund that closed last year at A$2.5 billion. It previously teamed up with the PE firm on a bid for hospital operator Healthscope, another business in which it has a sizeable shareholding.

Navitas pioneered the “pathway” model, whereby international students complete English language or other academic programs and are then enrolled in higher education institutions in Australia, New Zealand, the US, Canada, the UK, Singapore, and Sri Lanka. The company claims to serve more than 80,000 students through over 120 institutions across 31 countries.

Nearly two-thirds of Navitas’ revenue comes through these pathway arrangements. As of June 2018, it had partnerships with 18 universities in Australasia, 10 in North America, and nine in Europe. What Navitas brings to these partnerships is global marketing and recruitment infrastructure: it has over 120 recruitment staff in 20 offices and ties to more than 4,000 recruitment partners.

Meanwhile, the company’s careers and industry division operates the SAE chain of media colleges, which offers higher education programs on 51 campuses across 26 countries. In Australia, it delivers tertiary courses through the government’s adult migrant education and professionals skills programs, as well as in association with local colleges.

Navitas reported revenue of A$931 million for the 2018 financial year, down from A$955.2 million for the preceding 12 months. Over the same period, EBITDA shrank from A$155 million to A$82 million and the company swung from a net profit of A$80.9 million to a loss of A$55.3 million. The loss was mainly due to a rationalization of the careers and industry division, including the sale of some SAE campuses.

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• Topics
• Australasia
• Buyouts
• Consumer
• Australia
• Education
• BGH Capital
• AustralianSuper