14/12/2010 - 08:52

Navitas buys SAE for $289m

14/12/2010 - 08:52

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Global education service provider Navitas has reached an agreement to purchase media technology training institute SAE for $289 million.

Navitas buys SAE for $289m

Global education service provider Navitas has reached an agreement to purchase media technology training institute SAE for $289 million.

The acquisition will be funded by a debt facility and a fully underwritten $100 million institutional equity placement.

Oxford-based SAE was founded in 1976 and has expanded to become one of the world's largest media technology training institutes, with 47 campuses in 19 countries.

"The combined Navitas and SAE business will have over 50,000 students enrolled across 97 campuses around the world and will provide a platform for further expansion into key international markets," said Navitas chief executive officer Rod Jones.

"Over three decades SAE has built a global reputation as a high quality provider of creative and new media education and, as a leader in its field, SAE is well positioned to take advantage of the increasing global demand for skills based training in these areas," he said.

"Navitas and SAE share a commitment to quality educational outcomes for students and are both equally focused on strong organic growth within their respective fields.

"SAE will continue to be driven by its existing management team and will maintain its pioneering approach and culture.

"With its focus on domestic students, SAE provides Navitas with diversification of our student profile and earnings base as well as providing us with an opportunity to leverage our international student recruitment expertise to grow SAE.

"Education and skills training is a business we excel in and we are confident that we can add value to SAE within the Navitas Group." said Mr Jones.

The $100 million placement will be conducted via a bookbuild from a base price of $3.75 per share, representing a six per cent discount to the last closing price on December 13.

Morgan Stanley acted as Sole Financial Adviser on the acquisition and Sole Underwriter and Bookrunner on the institutional placement.

Blake Dawson acted as Legal Adviser and Gresham Advisory Partners Limited provided advice in relation to financing.

 

 

 

See company statement below:

Global education services provider Navitas Limited (ASX: NVT) today announced that it has entered into an agreement to acquire 100% of SAE Group (SAE), a leading global provider of creative and new media education.
Highlights:
Navitas is acquiring SAE for A$289 million, representing 8.75x estimated CY2010 EBITDA
 The acquisition is expected to deliver high single digit adjusted EPS accretion in FY2011 on a full year pro forma adjusted basis (based on broker consensus estimates for Navitas)
 The transaction will be funded by way of new debt facilities, a fully underwritten institutional equity placement and issuance of shares to the vendor
 Post acquisition, Navitas will retain a strong balance sheet with material additional headroom under new facilities
Navitas will pay a deferred amount on any final audited EBITDA in excess of A$33 million in CY2010 at the same 8.75x multiple (in shares at the institutional placement price)

SAE Group
Founded in Australia in 1976, SAE has expanded to become one of the world's largest media technology training institutes, with 47 campuses in 19 countries.2 SAE offers a range of post secondary education opportunities to approximately 8,000 students, including certificate, diploma, degree and Masters programs across three major fields of study: audio production, film production and interactive media.
SAE benefits from high brand recognition within its core markets and is well placed to continue to benefit from growth in demand for multimedia and technology skills. SAE owns and maintains its key intellectual property and delivers its programs via a combination of classroom based teaching and practical learning in its state-of-the-art training facilities.
SAE is expected to deliver revenue of $109 million and EBITDA of $33 million in CY10. On a constant CY10 currency basis, SAE recorded $100 million of revenue and $28 million of EBITDA in CY09.
Strategic Rationale
The acquisition provides Navitas with a number of benefits including:
 Expansion and diversification of earnings both in terms of geography and product offering
 A high demand complementary new product range that will augment existing Navitas offerings
 Further diversification of Navitas' global footprint and student profile in the key Australian, European, UK and US markets
 Potential to leverage brand and curriculum
 Ability to leverage expertise to add value to marketing and student recruitment
 Attractive financial profile

"The combined Navitas and SAE business will have over 50,000 students enrolled across 97 campuses around the world and will provide a platform for further expansion into key international markets," said Navitas Chief Executive Officer, Rod Jones.
"Over three decades SAE has built a global reputation as a high quality provider of creative and new media education and, as a leader in its field, SAE is well positioned to take advantage of the increasing global demand for skills based training in these areas."
"Navitas and SAE share a commitment to quality educational outcomes for students and are both equally focused on strong organic growth within their respective fields. SAE will continue to be driven by its existing management team and will maintain its pioneering approach and culture."
"With its focus on domestic students, SAE provides Navitas with diversification of our student profile and earnings base as well as providing us with an opportunity to leverage our international student recruitment expertise to grow SAE."
"Education and skills training is a business we excel in and we are confident that we can add value to SAE within the Navitas Group." said Rod Jones.
Financial Impact
The acquisition is expected to have the following impact on Navitas:
 High single digit adjusted EPS accretion in FY2011 on a full year pro forma adjusted basis (based on broker consensus estimates for Navitas)
 Positive overall effect on EBITDA margins
 Material revenue contribution from foreign currencies (EUR, GBP and USD)
 Maintenance of conservative gearing profile

Conditions Precedent
The acquisition is subject to conditions precedent including accreditation approvals from regulatory bodies in key geographies. Subject to satisfaction of conditions precedent, the acquisition is expected to close by 31 January 2011 with the exception of the US business which is expected to be subject to a 90 day accreditation approval process. Payment on closing will be net of a hold back of A$7 million relating to SAE's US business, with this amount to be paid upon obtaining US accreditation clearance and the US business passing to Navitas.
Acquisition Funding
The acquisition and transaction costs will be funded by a combination of:
 Debt: A$175 million in draw down on new facilities
 Equity: A$100 million from a fully underwritten institutional equity placement
 Shares to vendor: A$19 million

Navitas has entered into new 3 year debt facilities with Westpac and ANZ of A$200 million to fund the transaction.
Navitas has today launched a fully underwritten institutional equity placement to raise A$100 million. The placement will be conducted by way of a bookbuild from a base price of A$3.75 per share, representing a 6.0% discount to the last closing price on 13 December 2010 and will result in a maximum issue of approximately 26.7 million new ordinary shares (7.8% of existing issued share capital). Navitas' director shareholders will not participate in the placement. The institutional placement has been fully underwritten by Morgan Stanley Australia Securities Limited. Navitas expects to make an announcement regarding the outcome of the placement, which will lift the trading halt, before the commencement of trading on 15 December 2010.

Any deferred consideration will be paid in Navitas shares at the placement price following the final audit. All vendor shares will be escrowed until 31 December 2011.

In addition, Navitas will offer a Share Purchase Plan (SPP) at the same price as the institutional placement. Navitas will offer eligible shareholders as at 4:00pm Perth time on 13 December 2010 (the Record Date) an opportunity to participate in the SPP allowing them to acquire up to $15,000 in new Navitas shares. The SPP will be subject to a scale back at the discretion of the Navitas directors. Details of the SPP will be sent to shareholders in the near future.
Key Dates
SPP Record Date 13 December 2010
Institutional Bookbuild 14 December 2010
Trading Halt Lifted and Existing Shares Recommence Trading 15 December 2010
Placement Settlement Date 20 December 2010
Allotment and trading of Placement Shares 21 December 2010
SPP Offer period 21 December 2010 to 11 January 2010
Allotment of SPP shares 18 January 2010
Trading of SPP shares 19 January 2010
SPP holding statements dispatched 20 January 2010

Trading Update
Navitas announced at its AGM on 23 November that it anticipates growth in FY2011 notwithstanding investment in its new University Programs colleges and the headwinds being experienced in the Australian market. Navitas remains comfortable with the outlook for its existing business, and expects to grow revenue, EBITDA and EPS in FY2011. Navitas is currently trading in line with market expectations.

Morgan Stanley acted as Sole Financial Adviser on the acquisition and Sole Underwriter and Bookrunner on the institutional placement. Blake Dawson acted as Legal Adviser and Gresham Advisory Partners Limited provided advice in relation to financing.

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