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Laureate buyout foe wants more

The Baltimore Sun

A second major shareholder announced yesterday opposition to the management-led buyout of Laureate Education Inc. as the Baltimore operator of foreign and online universities continued its tender offer to take the company private for $62 a share.

Select Equity Group Inc., a New York hedge fund and Laureate's largest shareholder, said in a letter to independent board members that it believes the current bid is too low.

In the letter, Select Equity contends that Laureate could command at least $75 a share given its recent performance. Select Equity, which owns 9.8 percent of Laureate, joins T. Rowe Price Group Inc., the second-largest shareholder, in opposing the deal.

The management-led group seeking to take Laureate private for $3.82 billion said it still expects to gain enough approval from shareholders despite the opposition.

The group said $75 a share is not an appropriate figure given that 68 percent of the company's profits come from Latin America, a less stable economic sector than the U.S., where Laureate's competitors derive almost all of their revenue. Laureate operates universities online and overseas.

Shares of Laureate rose 10 cents to close at $61.65 a share in Nasdaq trading yesterday.

Select Equity's opposition highlights the complexities surrounding the move to take Laureate private.

The investor group, led by Laureate Chairman and Chief Executive Officer Douglas L. Becker, raised its bid last week by $1.50 a share from its original bid of $60.50 in January.

Shareholders such as Select Equity and others also complained about the original price. But some analysts predict Laureate executives likely will gain enough support to move the deal forward.

The investor group launched its tender offer Friday and said the approval of shareholders representing only 43 percent of the outstanding stock may be required for the deal to close.

The agreement allows Becker's investor group to reduce that simple majority threshold by counting shares and options retained by Becker and R. Christopher Hoehn-Saric, a company director.

The investor group said shareholders representing about 14 percent of the outstanding shares have tendered or have stated that they intend to tender their stock in the offer. That includes William Blair & Co., of Chicago, Laureate's third-largest shareholder with 6 percent ownership, which said last week that it will support the sweetened offer.

Harvey H. Bundy III, a co-portfolio manager for small and mid-cap growth strategies with William Blair, would not comment yesterday.

The tender offer expires July 6.

Baltimore's T. Rowe Price, which holds an 8.2 percent ownership in Laureate, remains opposed to the transaction, saying the company is worth more than the offer price.

Select Equity's letter yesterday was signed by John D. Britton and James R. Berman, respectively the principal and general counsel of the hedge fund.

"The revised offer for Laureate is only 2.5 percent above the original offer, a negligible increase that values Laureate at a deeper discount to its peers today than the original offer did in January," the letter said.

It added that Laureate's recent operating results and newly disclosed earnings projections were higher than expected. And they said the "robust" company is recovering from the pitfalls of prior quarters.

Berman would not comment beyond yesterday's letter.

Despite the opposition, Trace A. Urdan, an analyst with Baltimore's Signal Hill Capital Group, said he expects the deal to go through.

"I don't think Select Equity can affect the deal," said Urdan, who does not own shares in Laureate. "They're trying to make a point and that's fine. But I think it's a bit of a vain gesture."

The latest offer is a 14 percent premium from the $54.41 closing price posted Jan. 26, the last day of trading before Laureate announced the original proposal.

A committee of Laureate's board of directors rejected three proposals before agreeing to the original $60.50 per-share offer, according to documents filed with the Securities and Exchange Commission.

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