The parents of BPP University are refinancing its property portfolio under a sale-and-leaseback deal worth £255 million – and several private equity houses are preparing off-market bids for the institution, EducationInvestor Global can reveal.
This publication has learnt that the owners of Vanta Education, BPP’s holding company, are in advanced talks with a “large US debt fund” seeking to acquire “most of” the university’s freehold campuses, which would be leased back to the operating company. BPP has 18 so-called ‘study centres’ in England and two in the Channel Islands.
A deal could be finalised within four weeks but is not guaranteed, sources stressed – although one insider said: “I am 70%-plus confident it will close”.
The property refi is being structured “carefully” so as not to constitute a change of ownership, which would trigger a regulatory review of BPP’s degree-awarding powers, it is understood.
BPP is one of few for-profit universities in the UK, specialising in law, business and technology, nursing and health, with subsidiaries in China, Hong Kong, Singapore, Malaysia, the US, South Africa and South America. The institution also offers degree-apprenticeships and executive training.
By offloading properties, Vanta Education’s private equity sponsors, The Vistria Group and funds managed by Apollo Global Management, could accept a lower price for BPP, which will return to market later this year if an off-market sale is unsuccessful.
In 2014, Montagu Private Equity sold on a leaseback basis properties owned by the University of Law, a competitor to BPP, prior to its sale in 2015 to Global University Systems (which is exploring a minority stake sale, as revealed exclusively by this publication).
“Without property in the mix”, investment bankers from Morgan Stanley – which has retained its mandate to sell BPP despite previous failed attempts at doing so – would target £450-£500 million for the organisation, a source said.
This range, based on BPP’s annual earnings before interest, tax, depreciation and amortisation (EBITDA) of at least £35 million, represents a price-to-earnings multiple of 12-14.
The discounted price would prompt refreshed interest in the university among a deeper pool of prospective investors, BPP’s owners are understood to believe.
In 2019, a formal auction of BPP was scrapped amid Brexit-related uncertainty. Last year, an off-market takeover attempt by buyout group BC Partners failed due to a dichotomy on pricing, which did not account for pandemic-induced risks, according to sources.
“Maybe it will be third time lucky,” one commented.
EducationInvestor Global can also reveal that as many as three private equity firms – whose identities are unclear – are gearing up to mount off-market offers in an effort to pre-empt a competitive auction later in the year.
“Two or three private equity firms are lining up to have a run at it [BPP] in the next few weeks,” said one insider. Another well-placed source confirmed this information.
If an off-market sale to private equity is unsuccessful, Morgan Stanley will once again put BPP on the block – perhaps within six months – sources said. EducationInvestor Global revealed in its ‘Rumour Has It’ newsletter last October that BPP would return to market in due course.
Morgan Stanley had previously welcomed bids of £500 million-plus for BPP, for which Vanta Education paid more than £300 million in 2009, when it was trading as Apollo Education Group.
The US investment bank would seek out private equity buyers as opposed to trade suitors, according to a source, who said: “Having gone round the loop twice, both times the shortlist comprised PE [private equity] firms. Trade is out of it, as far as I’m aware.”
A sale of BPP would continue a wave of consolidation within the UK’s private higher education market, in which Regent’s University London and Richmond, The American International University have changed ownership in the past 12 months.
According to filings with Companies House, Vanta Education in the year ended 31 August 2020 recorded profit totalling £141 million.
Vanta Education had not responded to a request for comment at the time of publication.
Date published: 28 January 2021