Veronis Digs U.K. E-Learning

Target: Granada Learning Ltd.

Price: £53M ($92.3M)

Buyer: Veronis Suhler Stevenson

Seller: ITV plc

Financial Advisor: Seller: Van Tulleken Co.

Legal Counsel: Buyer: Kirkland & Ellis LLP; Seller: Olswang

Accountant: Buyer: PricewaterhouseCoopers

In a deal scheduled to close Tuesday, Veronis Suhler Stevenson signed on to acquire Granada Learning Ltd. for up to £53 million ($92.3 million). The maker of electronic education products is being sold by U.K. television broadcaster ITV plc. Per terms of the transaction, Veronis will pay £35 million in cash and debt for the company outright, with an additional £18 million payment due subject to the performance of Granada over the next two years.

Focusing on age ranges from infancy to adulthood; London-based Granada has a catalog of more than 800 different education-based software and hardware products. It’s better-known curriculum-based products come under brand names like Letts Revision Guides, Leckie & Leckie Publishers and David Fulton Publishers, while nferNelson is the king fish among its testing and assessment software.

Veronis plans to put David Smith, former Chairman of T&F Informa plc, in the role of executive chairman of Granada, the acquisition of which marks the next chapter of VSS’s interest in the U.K. education segment. The firm also recently acquired Sherston Publishing Group, a provider of educational software for primary schools in the U.K.

Equity for this deal will come from VSS Communications Partners IV LP, a $1.25 billion-targeted investment vehicle that David Holland, a director at VSS’s London office, told Buyouts will hold a final close “imminently.” Another source close to the fundraising process said Fund IV is expected to close by the end of April.

Holland, who worked with VSS Partner Marco Sodi on the deal said, “There’s been a marked technology-driven change taking place in the [U.K.’s] education sector that grabbed our attention. IT hardware, computers and electronic whiteboards are starting to penetrate classrooms in a very significant way.”

For years, he said, VSS has been reviewing key players in the market, such as Granada, Pearson Education, Espresso Education, Hodder Education and Nelson Thornes. When the opportunity to acquire Granada was introduced to VSS last summer, it jumped at the opportunity.

“Below the key players are dozens, if not hundreds of smaller specialty companies that service very specific niches in the market—those are the ones that lend themselves to add-on acquisitions,” Holland said. “We wanted one substantial player that would make a strong platform for them.”

Holland, said he expects about 50% of Granada’s growth, while it’s a part of VSS’s portfolio, to come from bolt-on acquisitions. The rest will be organic.

“The government has invested billions of dollars for a more technological approach to education in this country, and the IT sector in education has a number of high-growth opportunities as a result of that investment,” Holland said.

Another attractive characteristic of Great Britain’s education sector, Holland said, is that it is a fragmented market. In the U.K., new education technologies and products are mostly picked up on a school-by-school basis, unlike the U.S. model which is geared more toward large contracts on a state-by-state or county-by-county basis.

The selling party of this transaction, ITV, is the largest commercial broadcaster in the U.K. Since 2004, the company has raised more than £300 million by divesting of its non-core assets. London-based Van Tulleken Co. ran the auction process for Granada. —A.N.