New York-listed workforce solutions provider Adtalem Global Education has agreed to buy Walden University, an online healthcare education provider, from Laureate Education for $1.48 billion in cash, narrowing its focus on a sector for which Covid-19 has been a boon.

Following the announcement of the deal, which will provide Laureate with a cash injection that it is poised to use to pay off further debt, the firm’s share price soared nearly 24%. Adtalem, whose market value of $1.6 billion is not much more than the price it will pay for Walden University, slipped 1%.

The acquisition, expected to close in the first quarter of fiscal year 2022, is a “pivotal step in Adtalem’s transformation to a leading workforce solutions provider with substantial scale in the rapidly growing healthcare industry”, said Lisa Wardell, chairman and chief executive.

“With a wide breadth of online, on-campus and hybrid healthcare programme offerings, this acquisition will significantly expand our national healthcare education footprint and will further enable us to reimagine the future of healthcare education at a time when global health has never been a greater priority.”

Adtalem’s portfolio also encompasses the American University of the Caribbean School of Medicine, Chamberlain University, Ross University School of Medicine, and Ross University School of Veterinary Medicine.

“Adtalem is better positioned to increase the talent supply to address the rapidly growing and unmet demand for healthcare professionals in the US and globally,” the company said.

After the transaction, Adtalem will have more than 90,000 students enrolled across 26 campuses in 15 US states and four countries, employing 6,100 faculty members.

Stephen Beard, chief operating officer of Adtalem, said: "We are excited to add an attractive and strategically aligned asset to our solution set that will create a more flexible and nimble organisation with increased scale, enhanced capabilities and greater social impact.

“We believe this transaction will create significant shareholder value as it is not only expected to be accretive to earnings but also to generate ROIC above Adtalem’s estimated cost of capital."

The price Adtalem will pay for Walden University represents a price-to-earnings multiple of 8.4, it said, pointing to “compelling financial rationale” underpinning the deal, which includes “expected contribution to free cash flow (excluding special items) of $60 million in year one”.

For Laureate, the transaction is the latest link in a chain of divestments executed in recent years, during which the firm has sold off non-core assets to pay off debt incurred under its private equity ownership before it went public in 2017.

Most recently, in July, Laureate offloaded its Australasian university portfolio to Strategic Education for $643 million.

That month, it was reported to be considering a sale of its assets in Brazil.

In March, Laureate sold a group of higher education institutions in Malaysia to Hong Kong’s HOPE Education Group.

Date published: 11 September 2020

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