Sylvan has deal to sell Prometric

Computer-testing business to be bought by Thomson Corp.

Price: about $775 million

Division's offices to remain here

local officials staying

January 27, 2000|By William Patalon III | William Patalon III,SUN STAFF

Baltimore-based Sylvan Learning Systems Inc. said yesterday that it has agreed to sell its Sylvan Prometric computer-testing division to Thomson Corp. of Canada for about $775 million.

Sylvan also again warned that its profit for the 1999 fourth quarter would come in below analysts' estimates, though it said it will be a few weeks before it provides details of the shortfall.

Analysts had expected the company to earn 48 cents a share in the quarter.

Sylvan shares closed higher yesterday at $15.25, up $1.1875 per share.

"We have experienced outstanding growth in the Prometric computer-based testing business over the last eight years," said Douglas L. Becker, Sylvan Learning's co-chief executive officer. "Thomson has the resources to take Prometric to even higher levels of performance while allowing Sylvan to focus our full attention on developing other promising businesses in our group of educational services companies."

The Baltimore-based Sylvan Prometric is the No. 1 worldwide provider of computer-administered testing services for such exams as the Graduate Management Aptitude Test (GMAT), as well as for certification programs like those sponsored by the Federal Aviation Administration for airline pilots and mechanics.

Though about a half-dozen global firms expressed interest in Sylvan Prometric, the Thomson's Learning unit of Thomson was chosen partly because it agreed to leave the headquarters in Baltimore and allow the Baltimore leadership to stay in place, Becker said.

Of the unit's 1,400 employees, about half are here.

Thomson Learning, which expects to close the deal during the current quarter, has a major presence in the testing arena -- a $4 billion market growing at an estimated 20 percent annually.

With 1999 revenue of about $214 million, Sylvan Prometric represents just under half the yearly sales of Sylvan Learning Systems.

Sylvan Learning had said in September that it was going to spin off the unit, selling as much as 20 percent to the public, to focus on its teaching business.

But the outright sale to Thomson might be a better deal, because the $775 million price for Sylvan Prometric was greater than the $738.8 million market value of all of Sylvan Learning at the time the deal was announced yesterday morning, said analyst Peter Martin, who follows Sylvan for Jeffries & Co.

Sylvan Learning's shares are down more than 55 percent from their 52-week high of $34.625.

That's partly because the whole sector for education-services firms has seen a drop in stock prices.

Sylvan hit hard

But Sylvan has been hit harder than most. A key reason: Because it consisted of a number of unrelated businesses, it has been tougher for investors to understand the company's prospects and to be confident that the company was well run. That's why Sylvan Learning has been selling or spinning off its extraneous businesses, a process that likely will culminate in the sale of Sylvan Prometric.

Jeffries & Co.'s Martin, who dismissed the company's earnings warning as not much of a surprise, said he likes the sales agreement. He also said he thinks it could transform the remainder of Sylvan Learning into a high-growth, highly efficient, Internet-focused company.

The core business that remains after the sale will provide educational services to families, school systems and industries. Its offerings will include teacher training, English-language education, and university programs aimed at adults looking to update their skills for "New Economy" jobs. It also operates private, foreign universities with full university curriculums, such as Universidad Europea, in Madrid, Spain.

Adding more universities

"We have a worldwide plan" to add more such universities, Sylvan's Becker said. He predicted that, within two years, the international-university segment would be larger than Sylvan Prometric is today.

The sale of the unit to Canada's Thomson will leave Sylvan Learning with more than $600 million in cash after taxes -- money that could be used to buy other education businesses or foreign universities, said Martin, the analyst.

Sylvan could stretch that money by striking partnerships or joint-venture deals that give it part interests in other businesses as opposed to buying them all outright, the analyst said.

By making sure those add-ons have an Internet flavor, the company could get a nice boost -- in growth and value.

Sylvan did not detail its plans for the sale proceeds yesterday -- stating that a strategy would be revealed within weeks.

Planning to bulk up

But Becker said Sylvan intends to bulk up from here on.

"It's not that we're a big company getting smaller," he said. "It's that we're a company that's going to incubate new companies and get larger."

Bloomberg News contributed to this article.

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