Baring backs China’s Ambow Education

Between November 9, 2011 and January 6, 2012, Campus Holdings, an acquisition vehicle set up by Baring and Ambow CEO and Chairwoman Jin Huang, acquired 11.4 million shares in Ambow for approximately $48.17 million through a series of privately negotiated transactions with shareholders. This equates to a 7.87% stake in Ambow, which raised $108 million through an IPO on the New York Stock Exchange in August 2010.

"Education in China is a sector in which Baring Asia has had extensive prior investment experience, and we continue to see strong demand for the private education industry in China due to sustained rising disposable incomes and high competition for admission to schools," Jean Eric Salata, founder and CEO of Baring Private Equity Asia, said in a statement.

Ambow has two business lines: test preparation courses covering grades K-12 at six primary and secondary schools and 96 tutoring centers as well as online; and career enhancement programs targeting university-level students and graduates.

The company has received PE backing at several points. Following the IPO, Avenue Capital was left with a 15.2% holding, Actis with $9.1%, Macquarie with 8.1%, CID with 4.4%, Ed Venture with 5.3%, CStar Investments with 5.3%, and JAFCO Asia Technology with 2.6%. Government of Singapore Investment Corp. (GIC) came in at the offering stage, purchasing 18.7% of the company.

Although profitable when it listed, net income attributable to shareholders was negative due to an accounting charge relating to preferred shares. Once these converted to ordinary stock after the IPO, Ambow started generating cash for shareholders. Since then, it has steadily built out the business, recording a 55.7% year-on-year increase in revenue to $212.9 million in 2010, while net income grew 56.3% to $32.7 million.

In the nine months ending September 2011, the firm generated revenues of $204.5 million, up 32.5% year-on-year, and net income jumped 23% to $24.2 million.

However, Ambow's public market performance has been poor - in part due to the investor confidence issues that have troubled all mid-cap US-listed Chinese firms following a number of cases of accounting fraud. The stock reached a peak of $13.92 in late 2010, but 2011 proved difficult. It ended the year down 40% compared to a 5.5% increase in the Dow Jones Industrial Average Index.

The stock closed at $6.95 on January 13. Macquarie maintains an "outperform" rating and a target price of $9 for the stock, while Wunderlich Securities says Ambow could reach $14.

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• Topics
• Expansion
• PIPEs
• Greater China
• Support services
• Baring Private Equity Asia
• Education
• Growth capital
• PIPE
• China