Ascendent abandons China education take-private

The transaction – which involved the company’s founder and chairman, as well as investors such as KKR, Gaorong Capital, and New Oriental Education & Technology roll over their stakes – was agreed at the end of April. Three months later, the Chinese government announced a swath of regulations that have effectively turned private tuition in core school subjects into a non-profit industry.

The Tarena take-private was priced at $4.00 per American Depository Share (ADS), a 27.4% premium to the December 7, 2020 closing price, the last trading day before the transaction was proposed. The stock was trading at $2.88 immediately prior to the regulatory reforms. It then fell by more than half in the space of a week. It closed at $0.74 on November 16, down 75% year-to-date.

There was a disagreement on terms between Tarena and the buyer consortium that led to the company delivering written notice of termination in September. The parties subsequently discussed potential solutions, but ultimately agreed on a termination, according to a filing.

Last month, Tarena and Xueda Education Group, a Shenzhen-listed tutoring services provider, said they would collaborate on adult professional education, childhood and adolescent computer coding and robotics programming courses, and robotics competitions and training camps. It is one of numerous pivots by education companies looking for ways to remain commercially viable.

Tarena, which was founded in 2002 and listed in 2014, regards professional IT education as its core strength. At the end of last year, it was offering courses in seven IT subjects and three non-IT subjects, as well as seven K-12 education programs. Courses are delivered through a combination of live distance instruction, classroom-based tutoring, and online learning modules.

As of December 2020, the company had 104 directly managed learning centers in 45 cities, plus 236 dedicated K-12 facilities in 53 cities. It also employed 504 career counselors to advise adult students and 122 employer cooperation representatives.

Tarena generated revenue of RMB1.89 billion ($290.8 million) in 2020, down from RMB2.05 billion the previous year, while its net loss narrowed from RMB1.03 billion to RMB771.2 million. The company has yet to release financial statements for the quarter ended September 2021.

Private equity investors have pumped billions of dollars into China’s private tuition space, much of it deployed with online large-class players like Yuanfudao and Zuoyebang. Exit prospects for many of these companies are now uncertain.

However, one PE-backed take-private has been launched since the regulatory intervention. In August, Primavera Capital Group offered to buy Liulishuo, operator of an English language learning app, for $33.3 million. The company's stock has struggled following a recent crackdown on online education platforms in China, although its services are primarily aimed at adults rather than the K-12 segment.

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• Topics
• Greater China
• Buyouts
• Consumer
• Regulation
• China
• Education
• Ascendent Capital
• KKR
• Gaorong Capital