EdtechX Holdings (“EdtechX”) (Nasdaq: EDTX), a special purpose
acquisition company (“SPAC”) seeking to acquire a target in the
education services and education technology industry, announced
today that it has entered into a definitive merger agreement
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 industry
leading 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 omnichannel 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 $61 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 #1 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 $43 million led by China International Capital
Corporation (CICC).
Meten has grown rapidly and profitably to reach
$200 million (RMB 1,424m) in revenue and $20.1 million (RMB 144m)
in EBITDA in 2018, up from $113.9 million (RMB 802m) in revenue and
$2.4 million (RMB 17.1m) 1 in EBITDA in 2016, representing a
2-year revenue CAGR of 33% and 2-year EBITDA CAGR of 190%.
The merger consideration in the transaction
implies $535 million in equity value for Meten. In connection with
the transaction, EdtechX may provide Meten with up to $100 million
of capital, including through the drawdown of up to $20
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 $43 billion in
2022, representing a 21% 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% of Chinese in education,
rising from 10% now, and so represents a $150 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
upskilling, 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”.
Meten Co-Founders, Jishuang Zhao, Siguang
Peng, Yupeng Guo, declared in a joint statement:
“With the support of EdtechX and its
international investor group, we become uniquely positioned to
strengthen our market leading position and to make the most of the
consolidation and digital growth opportunities available in our
industry. Our approach will continue to be focused on profitable
growth and to provide industry-leading English language education
and training services to Chinese students and professionals. We are
looking forward to this new phase of growth as a public company and
as Meten EdtechX.”
Summary of Transaction
Under the terms of the proposed transaction, the
parties will form New Holdco, and EdtechX and Meten will become
subsidiaries of New Holdco.
Upon closing of the transaction, New Holdco is
expected to have an initial fully diluted enterprise value of $614
million4, implying respectively 19.3x and 14.3x 2020 and 2021
projected Adjusted EBITDA5.
The current shareholders of Meten will receive
consideration of approximately 51.4 million shares6 of the combined
entity on closing of the transaction, representing $535 million in
equity value. Additionally, certain Meten shareholders may receive
up to an additional 4.0 million shares if New Holdco’s share price
exceeds $12.50 by fiscal year 2022, and an additional 7.0 million
shares if the share price exceeds $15.00 by fiscal year 2023.
Meten’s shareholders are rolling over up to 100% of their equity in
the transaction7.
Benjamin Vedrenne-Cloquet (CEO) and Charles
McIntyre (Chairman and CIO), the founders of EdtechX, will sit on
the board of New Holdco, as independent directors, alongside
Meten’s founders.
The board of directors of EdtechX and Meten have
unanimously approved the transaction. Completion of the transaction
is subject to approval by the shareholders of EdtechX and other
customary closing conditions. The transaction is expected to close
in the first quarter of 2020.
Chardan is acting as financial and capital
market advisor to EdtechX. Macquarie is acting as financial advisor
to Meten. Graubard Miller LLP is acting as legal counsel to
EdtechX. Morgan, Lewis & Bockius is acting as legal counsel to
Meten
Additional information on the proposed transaction will be
included in EdtechX’s Current Report on Form 8-K which will be
filed with U.S. Securities and Exchange Commission (“SEC”) and
available on the SEC’s website at www.sec.gov.
About Meten Education (China) and Likeshuo
-Meten, headquartered in Shenzhen in the heart of the Chinese
Silicon Valley, is a market leader in English Learning Training
(“ELT”) in China, with a leading position in the adult ELT segment.
Meten operates an omnichannel (retail and digital) business
comprising a nationwide network of 149 new generation learning
centers (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. The
company has been founded by entrepreneurs Jishuang
Zhao, Siguang Peng, Yupeng Guo. They have been running
the company since inception with a focus on profitable growth and a
shared vision of providing industry-leading English language
education and training services to Chinese students and
professionals. In January 2019, Meten raised a series C of
$43 million led by China International Capital
Corporation (CICC).
- Listed Chinese peers include:
- Omnichannel education stocks: TAL (NYSE:TAL), New Oriental
Education & Technology (NYSE:EDU)
- Pure play digital education stocks: GSX Tech Edu (NYSE:GSX),
Koolearn Technology (HKG:1797), Youdao (NYSE:DAO)
About EdtechX Holdings Acquisition Corp.
EdtechX Holdings Acquisition Corp.,
headquartered in London UK, is public acquisition company sponsored
by affiliates of a specialist “edtech” investment bank, IBIS
Capital, and Azimut Enterprises, a Milan based global asset
management firm with approximately $61 billion in AUM. EdtechX
listed in the Nasdaq on October 2018, as a Special Purpose
Acquisition Company (“SPAC”) with a primary focus on the education,
training and edtech sectors globally.
EdtechX is led by French Chief Executive
Officer, Benjamin Vedrenne-Cloquet, and British Chairman and Chief
Investment Officer, Charles McIntyre. Benjamin and Charles are long
standing business partners and have built businesses in the edtech,
media and financial services sectors. Together, they lead IBIS
Capital, a leading specialist education and edtech focused
investment bank whose advisory arm was involved in the acquisition
of Wall Street English China in 2018. In 2013, Charles and
Benjamin also co-founded EdtechX Global, a world leading conference
and insight network across Europe, Asia and China, gathering over
10,000 companies and 2000 industry leaders, innovators and
influencers in the education, training and edtech industries. In
addition, Charles McIntyre is Chairman of Learnlight, a
leading English tutoring digital platform for corporates. Benjamin
Vedrenne-Cloquet is also Chairman of the Board of CFBL (a French
English Bilingual College in London).
-------------
Additional Information and Where to Find
ItEdtechX intends to file a proxy statement, prospectus
and other relevant documents with the Securities and Exchange
Commission (“SEC”) to be used at its annual meeting of stockholders
to approve the proposed transaction with Meten. The proxy statement
will be mailed to stockholders as of a record date to be
established for voting on the proposed business combination.
INVESTORS AND SECURITY HOLDERS OF EDTECHX, METEN AND NEW HOLDCO ARE
URGED TO READ THE PROXY STATEMENT, PROSPECTUS AND OTHER RELEVANT
DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR
ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and
security holders will be able to obtain free copies of the proxy
statement, prospectus and other documents containing important
information about EdtechX, Meten and New Holdco once such documents
are filed with the SEC, through the website maintained by the SEC
at http://www.sec.gov. Copies of the documents filed with the SEC
by EdtechX and/or New Holdco when and if available, can be obtained
free of charge by directing a written request to EdtechX at
yweng@chardan.com ; and/or by directing a written request to Meten
at Wendy.Zhai@macquarie.com
Participants in the
Solicitation
EdtechX and Meten and their respective directors
and executive officers, under SEC rules, may be deemed to be
participants in the solicitation of proxies of EdtechX’s
stockholders in connection with the proposed transaction. Investors
and security holders may obtain more detailed information regarding
the names and interests in the proposed transaction of EdtechX’s
directors and officers in EdtechX’s filings with the SEC, including
EdtechX’s Annual Report on Form10-K for the fiscal year ended
December 31, 2018. Information regarding the persons who may,
under SEC rules, be deemed participants in the solicitation of
proxies to EdtechX’s stockholders in connection with the proposed
business combination will be set forth in the Registration
Statement for the proposed business combination to be filed by New
Holdco when available. Additional information regarding the
interests of participants in the solicitation of proxies in
connection with the proposed business combination will be included
in the Registration Statement that New Holdco intends to file with
the SEC.
No Offer or Solicitation
This communication shall neither constitute an
offer to sell or the solicitation of an offer to buy any
securities, nor shall there be any sale of securities in any
jurisdiction in which the offer, solicitation or sale would be
unlawful prior to the registration or qualification under the
securities laws of any such jurisdiction.
Forward Looking Statements
This press release includes “forward looking
statements” within the meaning of the “safe harbor” provisions of
the United States Private Securities Litigation Reform Act of 1995.
When used in this press release, the words “estimates,”
“projected,” “expects,” “anticipates,” “forecasts,” “plans,”
“intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,”
“propose” and variations of these words or similar expressions (or
the negative versions of such words or expressions) are intended to
identify forward-looking statements. These forward-looking
statements are not guarantees of future performance, conditions or
results, and involve a number of known and unknown risks,
uncertainties, assumptions and other important factors, many of
which are outside EdtechX’s or Meten’s management’s control, that
could cause actual results or outcomes to differ materially from
those discussed in the forward-looking statements. Important
factors, among others, that may affect actual results or outcomes
include: the inability to complete the transactions contemplated by
the proposed business combination; the inability to recognize the
anticipated benefits of the proposed business combination, which
may be affected by, among other things, the amount of cash
available following any redemptions by EdtechX stockholders; the
ability to meet NASDAQ’s listing standards following the
consummation of the transactions contemplated by the proposed
business combination; costs related to the proposed business
combination; [insert risks facing Meten’s business]. Other factors
include the possibility that the proposed transaction does not
close, including due to the failure to receive required security
holder approvals, or the failure of other closing conditions.
Neither EdtechX nor Meten undertake any obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law.
Use of Non-US GAAP
Financial MeasuresThis press release includes certain
financial measures, including Adjusted EBITDA, that were not
calculated in accordance with US GAAP and should not be considered
as alternatives to US GAAP. Adjusted EBITDA is defined as Net
income/(loss) -Net interest income + Income tax expenses +
Depreciation and amortization + Share-based compensation expenses +
One-off offering related expenses Meten believes that these non-US
GAAP measures are useful to investors for two principal reasons.
First, they believe these measures may assist investors in
comparing performance over various reporting periods on a
consistent basis by removing from operating results the impact of
items that do not reflect core operating performance. Second, these
measures are used by Meten management to assess its performance and
may (subject to the limitations described below) enable investors
to compare the performance of Meten and the combined company to its
competition. Meten and EdtechX believe that the use of these non-US
GAPP financial measures provides an additional tool for investors
to use in evaluating ongoing operating results and trends. These
non-US GAAP measures should not be considered in isolation from, or
as an alternative to, financial measures determined in accordance
with US GAAP. Other companies may calculate Adjusted EBITDA and
other non-US GAAP financial measures differently, and therefore
Meten’s non-US GAAP financial measures may not be directly
comparable to similarly titled measures of other companies. Not all
of the information necessary for a quantitative reconciliation of
these non-US GAAP financial measures to the most directly
comparable US GAAP financial measures is available without
unreasonable efforts at this time.
1 Exchange rate 1 RMB = $0.142
2 Subject to outcome of trust account redemptions.
3 Subject to level of Meten shareholders’ cash out, limited to
$10m, and transaction costs.
4 Subject to outcome of trust account redemptions and PIPE
raise
5 See thereafter on Non-US GAAP Financial Measures
6 Including vested options
7 Subject to i) a certain equity portion being cashed out,
limited to $10m, and ii) outcome of trust account redemption, iii)
drawdown on Azimut forward purchase agreement
Thank you !
- Meten-EdtechX-Charles McIntyre-Benjamin Vedrenne-Cloquet
- Benjamin Vedrenne-Cloquet
- Meten Website
- Likeshuo
- Meten-Likeshuo-EdtechX
Press /IR inquiries - Citigate Dewe Rogerson (London):
- Christen Thomson: Christen.Thomson@citigatedewerogerson.com
Capital Market inquiries:
Chardan (New York): Macquarie (Hong Kong):
Yingjie Weng: yweng@chardan.com Wendy Zhai: Wendy.Zhai@macquarie.com
Company inquiries
EdtechX Holdings: hello@edtechxcorp.com
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