The owner of tutoring giant Sylvan Learning Center expects to go public this week - possibly tomorrow - with an offering of at least 15 million shares priced between $12 and $14 each.
Baltimore-based Educate Inc., which split off from another local publicly traded company last year, intends to use all the money it raises to pay off a third of its debt.
The offering is the latest development in the evolution of a Baltimore company that grew into the most recognizable name in tutoring, but then was forced to split the company in two last year to get out from under losses in venture investing. The tutoring portion - now on the verge of going public - was bought by a New York investment group. The original company, Sylvan Learning Systems Inc., changed its name to Laureate Education Inc. and focuses on providing higher education in colleges abroad and online.
Educate is offering 5 million of the shares, from which it expects to net about $58.1 million. The rest of the shares being sold belong to stockholders Apollo Advisors IV LP, which owns about 90 percent of the company, and SSB Capital Partners, according to documents filed with the Securities and Exchange Commission yesterday.
Apollo will still hold more than half the shares after the initial public offering.
Sylvan is a familiar brand in tutoring with more than 1,000 centers across North America, most of them franchises.
`One of the best'
"It's probably one of the best, if not the best, recognized brand name in the tutoring business," said Jeff Silber, a managing director with Harris Nesbitt, an equity research firm in New York.
Educate is in a "quiet period" before the offering so its executives declined comment yesterday. The stock will trade on the Nasdaq market under the symbol EEEE.
Goldman, Sachs & Co., Merrill Lynch & Co., JP Morgan, Banc of America Securities LLC, Baltimore-based Legg Mason Inc. and ThinkEquity Partners LLC are underwriting the offering.
Silber said there's plenty of room for a publicly traded education company focusing on kindergarten through grade 12 because most of Educate's competitors focus on other areas. Score! Educational Centers, which offers tutoring through grade 10, and Kaplan Inc., with services that include college exam preparation, are owned by The Washington Post Co. New York-based Edison Schools is getting into government-contract tutoring, but its main business is school management.
Only a handful of national companies - public or private - handle tutoring. The business is often small operators, plying their trade at clients' kitchen tables or in mom-and-pop storefronts.
Educate, on the other hand, is international. It operates more than 940 tutoring centers in Europe under the name Schulerhilfe. The company also offers online tutoring programs through eSylvan.
Another subsidiary, Catapult Learning, provides tutoring-type help to students in schools - known as "supplemental educational services." That subset of the company's business is benefiting from the No Child Left Behind Act, which makes struggling schools eligible for such assistance.
Analysts believed that the company was in for a windfall when President Bush's landmark legislation to reform schools was passed in 2001. The money has been slow in materializing, but Educate is finally beginning to feel the effect.
No Child Left Behind revenue increased sevenfold the first half of this year, to $21.3 million from $2.8 million during the comparable period last year.
All told, the company produced revenue of about $170 million in the first half of the year, up a third from $128 million during the year-earlier period.
Schoolmates Douglas L. Becker and R. Christopher Hoehn-Saric built the original company - now Laureate - into a behemoth. But it needed to switch gears after a disappointing gamble on a venture capital fund for Internet education-related businesses that began in 2000, shortly before tech investment began drying up.
Hoehn-Saric, 42, is now chief executive and chairman of Educate. Becker remains at the helm of Laureate.
Some observers were surprised last year when Laureate sold its trademark Sylvan learning centers rather than its lesser-known colleges, but Becker wanted to chase the potentially higher growth of higher education.
"They had a great choice and a really good choice, and they took the great choice," Silber said.