China Education Group seeks HK$3.4 billion from IPO, eyes acquisitions in Europe and UK
International Finance Corporation, GIC, Value Partners Hong Kong and Greenwoods Asset Management among cornerstone investors
China Education Group, a leading higher private education provider, said it was seeking an initial public share offer of up to HK$3.4 billion (US$435 million), with part of the proceeds to be used to acquire schools in the UK and Europe.
The company will offer 500 million shares, 10 per cent of which will be offered in Hong Kong, at an indicative price of HK$5.86 to HK$7.02, with the subscription period starting at 9am on Tuesday, and ending by noon on Friday.
China Education’s IPO will represent the biggest amount of funds sought by a Chinese education company listed in Hong Kong so far. And the company said it would use about 60 per cent of the money for acquiring domestic and overseas schools as it attempts to grab a bigger market share in this highly fragmented sector. The remaining money will be used to repay bank loans, build new campuses and recruit more teachers.
“We have plans to acquire overseas boutique vocational schools that specialise in areas like business management, in regions such as western Europe and the UK,” said Yu Kai, the company’s chief executive.
“We would send our students on exchange programmes, or further their studies in these schools,” he added.
There is a huge demand for higher education in China, with more than 9 million students taking the highly competitive National Higher Education Entrance Examination, or gaokao, every year. China’s private higher education service sector has been expanding quickly but has few big players.
Wisdom Education International, China Yuhua Education Corporation, as well as Minsheng Education Group, three smaller private education providers in China, have listed in Hong Kong since January, with their share prices adding 176 per cent, 72 per cent and 9.5 per cent, respectively, so far this year.
“Most publics schools in China focus on academic skills but lack vocational training, so we founded our own schools,” said Xie Ketao, executive director and co-chairman of the company.
China Education owns the Guangdong Baiyun University, Baiyun Technician College, as well as the Jiangxi University of Technology, which are private universities and vocational schools with about 76,000 students. It said about 91 per cent of its revenue comes from tuition fees, and reported a net profit of 409 million yuan (US$61.8 million) last year, up 14 per cent year on year.
The cornerstone investors in the IPO include International Finance Corporation, global investment firm GIC, asset manager Value Partners Hong Kong and Greenwoods Asset Management. The company expects to start trading on December 15.