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2 Private Equity Deals in School Sector

March 07, 2006|From Reuters

Private equity firms headed into the educational services sector Monday, announcing deals to buy Education Management Corp. and a stake in privately held Learning Annex.

The $3.4-billion agreement by Providence Equity Partners and the investment arm of Goldman Sachs Group Inc. to buy Education Management is the largest deal on record in the for-profit education sector, according to market data firm Dealogic.

It would also be the first major acquisition of a public company in the sector by a private equity firm, said Alexander Paris, an analyst for Chicago-based Barrington Research, an investment research firm.

"I'm not surprised to see private equity make a big move like this," Paris said. "Private equity has significant assets that need to be invested."

Shares of Pittsburgh-based Education Management rose $4.66, or 13%, to $41.64, below the $43 a share in cash that the private equity firms agreed to pay for the provider of postsecondary education. The $43 is 16% over Education Management's closing price Friday.

Before the announcements, the last deal in the sector above $1 billion was Berkshire Hathaway Inc.'s 1996 purchase of FlightSafety International Inc., an operator of pilot training centers, for $1.5 billion.

Further deals may be in the offing as some companies have had difficulty because of regulatory and legal investigations, Paris said. Companies that have seen their names raised as targets or as acquirers include Santa Ana-based Corinthian Colleges Inc.; Career Education Corp. based in Hoffman Estates, Ill.; and Concorde Career Colleges Inc. in Mission, Kan. The stocks of all three of those companies rose Monday.

Terms of the Learning Annex deal, in which Apax Partners agreed to buy a significant minority interest in the adult education company, were not disclosed. Learning Annex started in New York in 1980 and has since expanded to Chicago and Los Angeles.

Education Management has 72 primary campus locations in 24 states and Canada that offer programs in such areas as design, fashion, culinary arts, health sciences and legal studies.

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