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Abril Wises Up | Educational Content Consolidates

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Source: Fusões & Aquisições. Thanks for your careful and consistent coverage.

Abril Educação buys Wise Up for R$ 877 million

The value of the deal, which will be paid off in parcels, may be modified according to revenues reflected in the language school’s next earnings report.

Abril Educação today announced the acquisition of the English language school Wise Up in a deal valued at R$ 877 million. The deal will be paid off in three installments and could be subject to renegotiation depending on the 2012 EBITDA of Wise Up. Cash flow and net debt might also affect the value of the deal between now and the signing date.

Founded in 1995, Wise Up has  76,000 students at 338 franchise schools in 89 Brazilian cities.

I make that out to be R$ 11,540 to acquire a student.

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Wise Up is an official English-language education supplier for the upcoming World Cup.

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Above, Abril’s timeline for its accelerating acquisitive phase, starting in 2010.

Abril Educação comprises the Ática and Scipione textbook publishing houses, the SER curriculum factory, and others.

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According to its Formulário de Referência 2012, the company,

in 2009 reached the broadest audience in the Brazilian education market in terms of students served, according to the Ministry of Education. We estimate that 71% of Brazilian students and more than 63% of elementary schools make use of our services or teaching materials. Our brands are recognized in all the markets we occupy. Our businesses have diverse sources of revenue which complement one another, creating synergies and capable of attending to all the needs of the elementary school and pre-university education cycle. We currently operate in five markets and are preparing an entry into two others …

The new businesses are prep courses for civil servant exams and the application of distance-education to language learning, a commitment born out by this recent bit of news. .

That 71% cannot be healthy for the Brazilian culture industry and educational policy.  71% plus vertical integration is why I tend to think of Abril as a tropical zaibatsu wannabe.

Abril has been in acquisitive mode for some time now. I have not run the numbers yet, partly because there are no precise numbers to be had. Even so, the financial grandiloquence of this deal ought to give us some inkling of the financial health and creditworthiness of the Grupo Abril in general.

The British network also has 36 units on deep sea oil rigs and another 21 schools located in four inland cities.

The deal is April’s third advance on the language-learning market. Last July, it purchased 51% of Red Balloon, geared toward children, at R$ 29.8 million. Abril also owns  6% of Livemocha, a U.S. distance-learning language franchise.

In a Material Event announcement to the market, Abril Educação says, “We have many other businesses in various educational markets, covering 4,500 Brazilian cities. There exist a number of synergies between these companies and Wise Up, whose shareholders will profit from the deal.  Abril also said that the deal signed with Wise Up calls for the medium and long-term retention of Wise Up senior management.

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I wonder: Would this deal make rumors of an Abril IPO more or less likely? Relatório Reservado reports:

Abril Educação is preparing a follow-on offering on the Bovespa. It is said to be awaiting an improvement, however modest, in the international markets. But we have heard this song before. Contacted, the company had no comment.

Abril is extremely, aggressively competitive in this area of its business. A memorable example was the smear campaign conducted against a competing publishing house — up for the same public tender as Abril — for the provision of text books.

The group’s flagship weekly, Veja, screamed bloody murder, calling the rival publisher a purveyor of communist indoctrination and accusing the education ministry of practicing North Korean brainwashing techniques. I shit you not. Never underestimate the power of «moral panic» marketing.

In general, I wonder whether mass-market publishing or education figures larger in the group’s bottom line. AE and a couple of other subsidiaries are listed, but the Group is not.

According to the Web site of the Editora Brazil, the magazine publishing arm of the business produces 192 million copies of 52 titles a year, with 28 million readers and 5 million subscribers.  If you are not planning to read it, please deposit in the proper recycling bin …

The two flagship educational houses, Àtica e Scipione, sold 53.2 million books to the public sector and 6.5 million to the private sector in 2011, according to company financials.