Wicks Group Latest To Score In Online Education

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 Wicks Group of Companies stands to make more than six times its money through the sale of online vocational school Penn Foster Education Group Inc. to test-prep giant The Princeton Review. The deal, announced Oct. 19, is valued at $170 million in cash.

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. Bain Capital Ventures, an investor in Princeton Review, and Falcon Investment Advisors LLC are providing $30 million of equity financing to help the company complete the acquisition. A lending group is providing $155 million in financing.

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 Warburg Pincus-backed Bridgepoint Education and Endeavor Capital-backed Grand Canyon Education have accounted for about one of every 20 LBO-backed sales in the past six months, according to Thomson Reuters, publisher of Buyouts. The most recent before Penn Foster was the $360 million IPO of Education Management, a company bought in 2006 by Leeds Equity Partners, Goldman Sachs Capital Partners and Providence Equity Partners.

“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 Arlington Capital Partners. The deal is expected to close by the end of the year. Scott Wieler, CEO of Boston-based boutique advisory firm Signal Hill Group LLC, brokered the sale for The Wicks Group.