VSS Makes Public Play In Education

Veronis Suhler Stevenson plans to gain control of a new public company in the education intervention market by merging one of its existing portfolio companies with another entity that’s already listed.

The proposed combination of portfolio company Cambium Learning Inc. with publicly-traded Voyager Learning Co. was termed a “merger of equals” by Scott Troeller, a partner at the New York-based buyout shop.

Voyager Learning’s stockholders will receive a cash consideration of approximately $194 million based upon an agreed price of $6.50 per share, and Veronis Suhler Stevenson will own approximately 55 percent of the combined company, which will be called Cambium-Voyager Holdings Inc.

The goal, Troeller said, is to become a leading player in the education intervention market, which targets at-risk and special education student populations. Annual spending for the niche is estimated at approximately $4.5 billion.

This will be the first significant deal made by Cambium Learning since its acquisition by Veronis Suhler Stevenson in 2007. The Natick, Mass.-based company provides instructional materials, services and technology for the education intervention market, serving pre-kindergarten through grade 12. The company generated revenue of approximately $100 million in 2008.

Pink Sheets-listed Voyager Learning, meanwhile, is a Dallas-based publisher of reading and math intervention programs. Its 2008 revenue was $98.5 million, down 10 percent from 2007’s total of $109.6 million.

While not the driving force behind the deal, Troeller noted that the education intervention market could see some wind at its back given a recent increase in government funding to the sector. The American Recovery and Reinvestment Act of 2009, which freed up $787 billion in federal funds to stimulate the economy, set aside an additional $28 billion of funding over the next two years to help improve teaching and learning for students with disabilities and others deemed most at risk of failing to meet state academic standards, according to the U.S. Department of Education.

“It’s critical to this country that we figure out how to increase the proficiency of our students,” Troeller said. “Right now the level of students that are not making the grade is unacceptable, and I think politicians on both sides of the aisle recognize that. It’s unacceptable for our country to have 40 percent of students not being able to read at grade level.”

He added: “Both of these companies [Cambium Learning and Voyager Learning] have great brands and products that really address the needs of these students and have proven that they can actually bring these students up to grade level and become fairly proficient at the various state tests.”

To consummate the deal, a new company called Cambium-Voyager Holdings Inc. has been created to acquire both companies and issue new shares in the combined company to stockholders of each entity. The combined company will be majority owned by VSS-Cambium Holdings III LLC, which in turn will be majority-owned by Veronis Suhler Stevenson.

Ron Klausner, president of Voyager Learning, will be named CEO of the combined company upon closing of the transaction, while Dave Cappellucci, CEO of Cambium Learning, will serve as president.

Troeller said the combined company will be a “sizable platform… that will be able to absorb further acquisitions and like-minded products.”

Veronis Suhler Stevenson acquired Cambium Learning from buyout shop J.H. Whitney & Co. in a 2007 deal reportedly valued between $300 million and $325 million. Cambium is a portfolio company in the 2006-vintage VSS Communications Partners IV, which closed with $1.3 billion in commitments.

The merger, which is subject to the approval of shareholders of Voyager Learning, is expected to be completed in October 2009. The plan then is for the combined company to seek to move its listing to the Nasdaq Global Markets exchange.