Private equity firm to acquire Keypath Education for AUD$187m 

Sterling Partners – already Keypath’s majority shareholder – will become its sole owner, acquiring the outstanding shares for $0.87 per share at approximately $186.8 million.  

“The special committee has carefully considered the advantages and disadvantages of the proposed transaction and believes the offer price is attractive and provides the unaffiliated stockholders with provision of liquidity and certain value today for their investment in our business,” said Diana Eilert, chair of Keypath’s special committee.  

The committee unanimously recommended the transaction, which was announced on May 24 and will see Keypath become a wholly owned subsidiary and delisted on Australia’s stock exchange.  

Despite strong Q3 revenue growth revealed by Keypath days before news of the acquisition, the lack of liquidity was a “significant impediment” for existing and potential Keypath investors, according to Eilert.  

“The news isn’t entirely surprising as it’s been a challenging operating environment for online program management companies (OPMs) for a number of years,” digital education specialist Neil Mosley told The PIE News.  

“There’s been a number of mergers and acquisitions during that period and continuing shakeout in this space, driven by economic and enrolment challenges,” Mosley added.  

The news isn’t entirely surprising as it’s been a challenging operating environment for OPMs in recent years

Neil Mosley

OPMs like Keypath help universities bring their programs online, but sector growth has slowed in recent years as institutions are increasingly managing their own online programming.  

This has pushed market valuations of publicly traded OPMs downwards, with leading provider Wiley announcing its acquisition last year and 2U facing “severe” financial distress.  

In recent years, Keypath has concentrated its focus on healthcare programs in the US and Asia Pacific region, pivoting away from UK and Canadian markets in subjects such as business, according to Mosley. 

“These Q3 FY24 results, including the increase in enrolments, demonstrate our strategic focus on healthcare in the US and the APAC region, providing us with confidence in driving revenue growth and continued profitability improvements in the coming periods, having reached adjusted EBITDA profitability in FY24,” said Keypath founder and CEO Steve Fireng. 

While there’s evidence that the pivot has been successful, the possibility of future growth “has to be balanced with the industry business and market risks that Keypath stockholders face remaining as a publicly listed company”, said Eilert.  

Sterling’s offer of $0.87 per share represents an 88% premium over Keypath CDIs’ six-month average price of $0.46 to May 2024 – a “generous” cash offer to shareholders that will support Keypath’s strategic direction, according to Mosley.  

“As Sterling partners were already a majority shareholder and as the strategic pivot seems to be so far going in a positive direction, I wouldn’t expect this move to result in any significant changes within Keypath and its day-to-day operations, but rather provides more ballast to the strategy it’s been trying to execute recently,” Mosley added. 

Private equity firm Stirling Partners invests in education, consumer, healthcare and technology services including OpenClassrooms and Laureate Education.  

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