Sylvan Learning Systems raises $22 million via IPO


Sylvan Learning Systems Inc. went to market yesterday in an initial public offering that raised $22 million for the Columbia provider of educational services.

The company sold 2 million shares of stock, initially priced at $11 a share, in an offering led by underwriters Alex. Brown & Sons Inc. and Robertson, Stephens & Co. After hitting a peak of $12 a share, the stock closed the day at $11.75.

Headed by a pair of young entrepreneurs, Sylvan does business in three main areas: providing tutorial services to children, mostly through its 500-plus learning centers around the United States and Canada; administering standardized scholastic tests by computer; and providing remedial tutorial services to employees in the workplace.

The company lost money in each of the last few years, including $6.2 million in 1991 and $3.2 million last year. But its sales were up to $13.2 million the first nine months of this year, compared with $8.3 million a year ago. Sylvan and some analysts saw reasons for optimism in light of the new ventures being pursued by its chairman and chief executive officer, 31-year-old R. Christopher Hoehn-Saric, and its president, Douglas L. Becker, 27.

The company "has been in a turnaround since the new management took over" in February 1991, said William K. Smith, an analyst with Renaissance Capital Corp., a Greenwich, Conn., institutional research firm specializing in initial public offerings.

Mr. Smith cited the company's recent contract with Educational Testing Service that gives Sylvan the right to administer by computer the Graduate Record Exam, the National Teachers Exam and, probably by the end of the year, the Scholastic Aptitude Test.

Also, Sylvan this year won a contract with Baltimore to provide its tutorial services to children at six city schools that receive grants from the federal Chapter I program for students in poor neighborhoods.

"They're one of the only providers working with the public schools,"Mr. Smith noted.

Still, in a report issued in advance of yesterday's public offering, Mr. Smith listed some of the risk factors, including a negative cash flow since 1990, the fact that $5 million of the offering is being used to pay off loans to institutional stockholders, that the firm has no independent directors, and the fact that its testing centers, "an important area for growth," are still unprofitable.

Only 18 of those centers are company-owned; the rest are franchised. Through the centers, about 100,000 students a year pay $25 to $30 an hour for the 36-hour program, in which an instructor works with no more than three students at a time.

In a way, this is not Sylvan's first foray into the public markets. Its predecessor, Sylvan Learning Corp., was founded in 1979, and was acquired by Kinder-Care Learning Centers Inc. in 1985. Kinder-Care sold Sylvan stock to the public that year and bought it all back three years later.

In 1991, Mr. Hoehn-Saric and Mr. Becker, through their investment company, formed a joint venture with Sylvan. In January of this year they bought Sylvan from Kinder-Care for $8 million.

A month later, Mr. Becker said that he expected the company to generate revenues of $1 billion a year within five years.

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