GPs sell Wall Street English China business back to founder

A spokesperson for CITIC confirmed that Luigi Peccenini, who opened the first WSE in Italy in 1972, had assumed control of the directly owned China centers in July with minimal disruption to students. Baring and CITIC retain full ownership of the international business, which comprises 420 centers across 29 territories. Most of these operate on a franchise basis.

The two private equity firms bought WSE in 2017 in a deal that delivered cash proceeds of around $300 million to existing owner Pearson. At the time, it was the world’s largest provider of English language training to adults, with revenue of GBP175 million ($230 million) and statutory operating profit of GBP7 million in 2016. In China alone, the company served 180,000 learners across 70 centers.

The impact of the COVID-19 pandemic – and subsequent closure of schools – has been significant. WSE took steps to cut costs and transition teaching to online platforms, but the size of the offline operation meant it moved slower than others, according to a source familiar with the situation. The number of centers has shrunk to 39 across 11 cities.

Meanwhile, existing online-only players made the most of their competitive advantage. These companies were already in a position of strength, with English language tuition specialists Liulishuo and Meten International Education Group going public in the last couple of years and VIPKid attracting substantial funding. Leading generalists in the large-class K-12 online education segment also offer English tuition, including Yuanfudao, GSX Techedu, and Zuoyebang.

Peccenini was responsible for taking WSE into China in 2000. He exited the business The Carlyle Group and Citi Private Equity seven years later and they sold to Pearson for $145 million in 2009. Peccenini retained the title of honorary president throughout these ownership changes. He currently lives in China.

WSE is not the only private equity-backed, China-related education business to run into difficulty.

WorldStrides, a US-based provider of study-abroad programs for high school and university students owned by Eurazeo and Primavera Capital Group filed for bankruptcy protection in July. They purchased the business in 2017 in part because they felt there was a strong China expansion angle.

Meanwhile, COVID-19 did not deter Permira in its acquisition of a majority stake in EF Kids & Teens, an English language education provider that operates 288 schools in China and 79 in Indonesia, in July at a reported valuation of $1.5 billion. Existing owner EF Education First will retain a minority interest in the business.

EF Kids & Teens responded to the pandemic by shifting much of its teaching online. Permira will not only invest in expansion of the school network and development of ongoing academic programs but also support the online platform.

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• Topics
• Greater China
• Buyback
• Consumer
• Education
• China
• CITIC Capital
• Baring Private Equity Asia