EdtechX Holdings (EdtechX), a special purpose acquisition company (SPAC) seeking to acquire a target in the education services and education technology industry, is to merge with Meten Education (China) (Meten).
Meten and its digital platform Likeshuo are a market leader in English Learning Training (ELT) in China. The combined entity (New Holdco) will operate as Meten EdtechX and focus on providing English and future skills training for a growing market of Chinese students and young professionals. Meten EdtechX intends to pursue expansion plans including market consolidation in China and the roll out of Meten’s existing omni-channel distribution platform, combining digital delivery and strategic retail presence, across a total addressable market of more than 600 cities in China.
EdtechX, headquartered in London (UK) and listed on the Nasdaq in October 2018, was formed to build an industry leading platform of next-generation education and training businesses through targeted acquisition, consolidation and development of companies that are growing, profitable and early adopters of technology. EdtechX is sponsored by affiliates of a specialist “edtech” investment bank, IBIS Capital, and Azimut Enterprises, a Milan based global asset management firm with approximately USD61 billion in AUM.
Meten, headquartered in Shenzhen in the heart of the Chinese Silicon Valley, is a market leader in ELT in China, with a No1 position in the adult ELT segment (source: Frost & Sullivan). Meten operates an omnichannel (retail and digital) business comprising a nationwide network of 149 new generation learning centres (covering 32 cities in 14 provinces) under the brands Meten (adult) and ABC (junior brand), as well as the popular English digital tutoring platform for young professionals, Likeshuo. In January 2019, Meten raised a series C of USD43 million led by China International Capital Corporation (CICC).
Meten has grown rapidly and profitably to reach USD200 million (RMB1,424m) in revenue and USD20.1 million (RMB144m) in EBITDA in 2018, up from USD113.9 million (RMB 802m) in revenue and USD2.4 million (RMB17.1m) 1 in EBITDA in 2016, representing a 2-year revenue CAGR of 33 per cent and 2-year EBITDA CAGR of 190 per cent.
The merger consideration in the transaction implies USD535 million in equity value for Meten. In connection with the transaction, EdtechX may provide Meten with up to USD100 million of capital, including through the drawdown of up to USD20 million from an irrevocable commitment provided by Azimut pursuant to a forward purchase contract originally entered into in connection with EdtechX’s initial public offering2. These proceeds are expected to mostly fund future expansion as well as potential synergistic and accretive acquisitions3.
According to research published by Citibank, the ELT market in China is expected to grow to USD43 billion in 2022, representing a 21 per cent CAGR, mainly driven by growing expenditure on education, urbanisation, increasing awareness of the importance of English, and technology development.
According to research published by Morgan Stanley, the fast paced urbanisation of China drives demand for education, vocational training and edtech services. By 2030, online tutoring could be utilised by over 30 per cent of Chinese in education, rising from 10 per cent now, and so represents a USD150 billion market.
EdtechX Co-Founders, Benjamin Vedrenne-Cloquet (CEO) and Charles McIntyre (Chairman and CIO) declared in a joint statement:
“The growing urban Chinese middle class’ aspirations for their own careers and their children’s academic success is unleashing large consumer spend and investment opportunities for the education and lifelong learning markets in China. Education in China has become the ultimate consumer good. Demand for tutoring, English language training, job-oriented up-skilling, is growing at double-digit rate. Meten EdtechX will operate at the heart of this with a market leading position in the ELT segment and a profitable omnichannel business model combining strategic retail presence, technology and digital delivery.”
