Target: Penn Foster Education Group Inc.
Price: $170 million
Buyer: The Princeton Review Inc.
Seller: The Wicks Group of Companies
Financial Adviser: Seller: Signal Hill Group LLC
The sale will generate a return of 6.5x invested capital after barely two years for The Wicks Group, which put up $20 million of equity to buy the Scranton, Pa.-based company in a $40 million deal back in 2007, according to a source familiar with the transaction.
Executives at New York-based Wicks Group decided to sell the company because they had achieved its EBITDA growth targets. While they saw more growth opportunity in the company, they knew it would have to come through acquisitions, which would entail a holding period of another five years or so, said Daniel Black, a partner at the firm. Black declined to disclose return figures related to the deal and performance metrics related to the company.
The Penn Foster’s EBITDA when The Wicks Group bought the company stood at $6.3 million, and the company is expected to make about $18 million in EBITDA in 2009, according to a source familiar with the deal. The company posted about $90 million in revenues in 2008 while The Princeton Review reported revenues of about $139 million for the same year, according to a press release from The Princeton Review.
Penn Foster operates three accredited educational institutions—Penn Foster College, Penn Foster Career School and Penn Foster High School—that collectively have more than 223,000 students in more than 150 countries, according to the press release.
Black said Wicks Group helped the company achieve its financial targets by improving its marketing and sales departments and by expanding its course offerings to include more classes that offer training for in-demand jobs in health care and pet care.
The agreement to sell Penn Foster marks another in a string of successful buyout-backed education deals. Sales or IPOs of education services companies, such as
“Online delivery of information and education is a mega-trend that will be with us for awhile,” Black said.
The previous exit for Wicks Group, which last raised a $535 million fund in 2004, came in October 2007 when it sold Sports Enthusiast Media, a company that provides data for the sports industry, to