Baring Asia to exit Noah Education as MSPEA makes take-private offer

According to a regulatory filing submitted in late December, the consortium is willing to pay $2.80 per American Depository Share (ADS) for all outstanding shares. This represents a 24.4% premium to the December 23 closing price and a 49% premium to the volume-weighted average price over the last 180 trading days.

The consortium already controls 59.3% of Noah. As of June 2013, Xu Dong, Noah's chairman and acting CEO, owned 22% of the business, while Benguo Tang, the company's president and COO, held 14%. Xiaotong Wang, a board member and co-founder of Noah alongside Dong and Tang, owned 11.4%.

Baring Asia held 8.9%, having originally invested $15 million in the company for a 21.84% stake in 2004 via its second pan-regional fund. The private equity firm made a partial exit in March 2007 to Lehman Brothers and UMC Capital. Seven months later Noah went public on NASDAQ, raising $137.9 million.

The transaction will be financed by a combination of rollover equity from existing shareholders and fresh equity and debt capital provided or arranged by MSPEA. The private equity firm's contribution would come from its fourth Asia fund, which is expected to close early next year on at least $1.5 billion.

Founded in 2004, Noah operates in three areas: kindergarten and pre-school education, primary and secondary schools, and supplemental education, specifically English-language training for 3-12 year-olds.

The company has a network of 48 kindergartens in Guangdong province, Hunan province and the Yangtze River Delta under the Wentai Education, Yuanbo Education and Little New Star brands. It owns and operates five primary and secondary schools, all based in Guangdong, and runs 10 supplemental education centers in Hunan and Shanxi province.

According to Deloitte, China's private education industry will be worth RMB640 billion ($105 billion) in 2015, up from RMB426 billion in 2012. A separate report by iResearch projects family spending on education in China to reach RMB963 billion in 2013, with compound annual growth of 11% since 2004.

Noah posted a net revenue of RMB211.8 million for the year ended June 2013, up 29.9% year-on-year, while net income came in at RMB22.8 million against a loss of RMB47.8 million in 2012. The company was profitable in 2009 and 2010 but slid into loss the following two years, in part due to the sale of the electronic learning products business, which had been involved in several intellectual property cases.

Earlier in December, MSPEA supported a management buyout of Sino Gas International Holdings that values the US-listed Chinese gas distributor at approximately $15.9 million. It previously completed the privatization of Feihe International while a process for Yongye International is still underway.

A total of 10 PE-backed take-privates of US-listed Chinese firms have been completed since August 2011. A further 15, including Noah, are still in process.

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• Topics
• Buyouts
• Exits
• Greater China
• China
• Exit
• Education
• Morgan Stanley Private Equity Asia
• Baring Private Equity Asia
• buyout