Going private will allow Laureate Education Inc. to more aggressively expand in inherently risky overseas markets without the quarterly pressures of Wall Street, said its chairman and chief executive officer yesterday.
"If you miss a quarter, the company gets to be referred to as a broken company. It can be a self-fulfilling prophesy," said Douglas L. Becker, in his first interview since the buyout of Laureate was announced in January.
Becker, who successfully led the $3.82 billion buyout, detailed some of the company's plans, explained his reasons for going private and responded to criticism of the transaction raised by its two largest shareholders.
The investor group led by Becker also announced yesterday that it would acquire 90 percent ownership of the company, allowing the transaction to close more quickly and without a shareholder vote. No timeline has been established on when the company will stop trading on Nasdaq.
Through two tender offers, the last of which expired Wednesday, the investor group acquired 89 percent of shares. The investor group said it will buy newly issued shares of Laureate, a move that would give investors a 90 percent stake.
The investor group will acquire the remaining shares of Laureate common stock at the offer price of $62 per share.
Laureate shares rose 9 cents to close at $61.97 yesterday.
Laureate operates Walden University, its flagship U.S. online school, and about two dozen higher education institutions abroad.
About 80 percent of its revenue is generated in nations in Latin America and Europe.
Becker said Laureate wants to explore business opportunities in India, China, Thailand, Singapore and the Philippines, and in the Middle East.
Despite increased competition overseas, Becker said he felt "we would have to be less aggressive in how we manage the company because many shareholders have a fairly low tolerance for volatility and risk.
"My concern was when I thought we should be the most aggressive, there was increasing pressure from stockholders to be less aggressive," he said.
In recent years, Laureate has been riding a wave of double-digit revenue and student enrollment growth. Laureate reported a profit of $104.2 million on revenue of $1.15 billion last year.
The buyout deal overcame strong opposition from Laureate's two largest shareholders, New York hedge fund Select Equity Group and Baltimore's T. Rowe Price Group.
Even though the investor group raised its bid to $62 a share, from the original offer of $60.50 per share, opponents continued to balk at the price, pointing to Laureate's recent performance and long-term growth potential.
They also said negotiations were tainted by conflicts of interest, given that management wanted to take the company private.
Becker acknowledged that management-led deals carry inherent conflicts, but noted that the company's independent directors approved the deal. Becker and R. Christopher Hoehn-Saric, a Laureate director and member of the investor group, abstained from all discussions and votes on the buyout offer.
Describing T. Rowe Price as a long-term and patient investor, Becker said the Baltimore money manager was the exception among shareholders who were more interested in making quarterly profits.
Steve Norwitz, a spokesman for T. Rowe Price, said that the company reluctantly tendered 8.2 percent of its shares during the second tender offer to receive its money faster and because a majority of shareholders had tendered their shares in the first offer.
As part of the deal, Becker would have received about $78.1 million in payouts for stock options and restricted stock, according documents filed with the Securities and Exchange Commission.
But Becker agreed to cancel the payouts in exchange for a new deferred compensation plan.
Becker and Hoehn-Saric, chief executive officer of Baltimore-based Educate Inc., have agreed to accept the original $60.50-per-share price in connection with the rollover of their shares.
Becker is rolling over $103 million in Laureate shares into stock of the new company.
hanah.cho@baltsun.com