Laureate says deal is going forward

The Baltimore Sun

Despite opposition from its two largest shareholders, Laureate Education Inc. will become a private company after a majority of investors tendered their shares in a $3.82 billion deal led by Chairman and Chief Executive Officer Douglas L. Becker.

The investor group said yesterday that about 59 percent of Laureate's outstanding shares were tendered for $62 apiece. The deal required that a simple majority of the outstanding shares be tendered.

"With the future direction of the company now clear, we will be able to focus all our attention on serving Laureate's students and continuing the growth of the company around the world," Becker said in a statement.

The group also launched a second offer yesterday, which expires at 5 p.m. EDT July 18, according to documents filed with the Securities and Exchange Commission. A second tender offer could allow for a quicker turnaround to complete the transaction. By obtaining 90 percent of Laureate's stock in tender offers, the company would not have to hold a shareholder vote, according to SEC documents.

Once the second offer is completed, the group will convert any remaining shares for the same price, and the deal could close almost immediately if the 90 percent stock ownership is secured.

"It's an offer to the folks who had voted against the tender -- now that they've effectively lost -- to get their money out" faster than waiting until the deal is completed, said Trace Urdan, an analyst at Baltimore's Signal Hill Capital Group.

Shares rose 26 cents to close at $61.86 yesterday on the Nasdaq stock market.

The initial tender offer was launched June 8, after the investor group raised its bid price to $62 per share, an increase of $1.50 a share, amid growing shareholder opposition.

The group initially offered $60.50 per share, an 11 percent premium from the closing price of $54.41 on Jan. 26, the last trading day before Laureate announced its proposal. Several large shareholders said the price was too low.

Largest stake

The sweetened bid was 14 percent over that last trading price.

The higher bid, though, was not enough to gain the support of Laureate's largest shareholder with 9.8 percent ownership. New York hedge fund Select Equity Group, which opposed the original offer, said Laureate was worth at least $75 a share. It joined Baltimore's T. Rowe Price Group in contesting the revised deal.

Price, which owns 8.2 percent of the company's shares, is Laureate's second-largest shareholder.

Select Equity and Price declined to comment yesterday.

The successful tender offer did not surprise analysts, who had predicted the transaction would be approved.

The investor group had secured support from shareholders representing 14 percent of shares: William Blair & Co., Laureate's third-largest shareholder with about 6 percent of shares; Laureate board members with about 6 percent ownership; and an entity affiliated with Don E. Ackerman, which committed about 2 percent.

Urdan, the Signal Hill analyst, said the sweetened offer helped sway shareholders like William Blair, which for several years had been Laureate's largest shareholder.

"The margin would have been incredibly tight if they voted against it," Urdan said.

The buyout agreement permitted the investor group to reduce the simple-majority threshold by counting options held by Becker and R. Christopher Hoehn-Saric, a company director. In that case, the group said it needed approval of shareholders representing only 43 percent.

But Becker and Hoehn-Saric did not exercise their options.

Foreign revenues

Besides Becker, the investor group includes private equity firms Kohlberg Kravis Roberts & Co.; Citigroup Private Equity; hedge fund S.A.C. Capital Management; and Sterling Capital.

Becker and Hoehn-Saric are founders and managers of Sterling Capital.

Laureate reported $104.2 million in profit on revenue of $1.15 billion last year. About 80 percent of its revenue is generated abroad, including nations in Latin America and Europe.

hanah.cho@baltsun.com

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