São Paulo-based Arco Platform, an educational software company that offers technology, services and content from kindergarten to high school, has entered into agreements with Dragoneer Investment Group, which is investing $100 million, and General Atlantic Partners (Bermuda), which is investing $50 million, through the purchase of convertible senior notes.
Each note will be convertible at the option of the holder into Arco’s Class A common shares at the agreed conversion rate, which is equivalent to an initial conversion price of $29 per share. The conversion price represents an approximately 65% premium to the trailing 30-day volume-weighted share price. Dragoneer and General Atlantic will beneficially own approximately 5.6% and 2.8%, respectively, of the total shares of the company.
The convertible notes mature in seven years and bear interest at 8% per year fixed in Brazilian reais, payable quarterly in cash in arrears in US dollars, mitigating currency risk.
Ari de Sá Neto, founder and chief executive of Arco, said: “We are excited to have Dragoneer and General Atlantic as investors and valuable future partners to our company. We see clear value creation arising from these partnerships, as we will benefit from their global investment experience in high-growth companies, while taking advantage of a better funding profile to support our growth strategy.”
Eric Jones, partner at Dragoneer Investment Group, said: “In building Arco’s technology platform, Ari has made a best-in-class pedagogical approach accessible to over 1.8 million students across Brazil. Arco’s brands are loved by teachers, students and parents alike, and drive real improvements in educational outcomes. At the business level, Arco has strong revenue growth and visibility, expanding customer cohorts, minimal churn, and near-to-40% EBITDA margins. We are thrilled to support the Arco team as they continue to scale quickly and expand their platform in education.”
J.P. Morgan acted as capital markets advisor to Arco on the transaction.
Date published: 19 November 2021