Australia’s BGH closes in on Navitas buyout

This will be BGH’s first significant investment since it was established in 2017 by Ben Gray, formerly Asia co-head of TPG Capital. The firm, which closed its debut fund at around A$2.6 billion in May of last year, previously teamed up with AustralianSuper and other co-investors to bid for hospital operator Healthscope. The company subsequently agreed to buyout Brookfield Asset Management.

The BGH consortium has entered into a scheme of implementation to acquire 100% of the company for A$5.825 per share, a 33.9% premium to the closing price on October 9, the last trading day before the bid was announced. The consortium initially offered A$5.50 per share and the Navitas board accepted an improved offer in January. The bid – to be put before shareholders in June – equates to an enterprise valuation of A$2.3 billion and EBITDA multiple of 15.5x.

The consortium already owns 18% of Navitas. Jones has 12.6% 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. With the Healthscope deal, AustralianSuper was bound to vote in favor of BGH even if there were a superior offer. This clause was removed from the Navitas transaction, although BGH has the right to match any superior offer within a set timeframe.

“BGH and I have a shared vision for Navitas which is centered around quality, student experiences, student outcomes and developing very deep, trusted relationships with our university partners and other key stakeholders. I am excited to be given the opportunity of working again with the great professional staff at Navitas to deliver this vision,” Jones said in a statement.

The company 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. It 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