MBK in talks to buy Korea's top online education firm MegastudyEdu

MBK Partners, one of Asia's largest private equity firms, is in exclusive talks to acquire Korea’s top online education company MegastudyEdu Co., according to investment banking sources on Tuesday.

Both parties will complete due diligence by August and sign a contract for the deal as early as the third quarter of this year.  

The PE firm plans to acquire about a 35% stake in the education company, which includes Founder and Chairman Son Joo-eun’s 13.5% stake, CEO Son Sung-eun’s 13.5% stake and Megastudy Co.’s 6% stake.

MegastudyEdu provides education services for all age groups – primary, middle and high school students – and for applicants to Korea’s public service exams. It was spun off in 2015 from Megastudy, which invests in education businesses.

If clinched, the deal will make MBK the largest shareholder of MegastudyEdu. Key shareholders include Chairman Son and affiliated persons, Fidelity Management & Research Company, and Korea's National Pension Service (NPS), the latter two holding 6.7% and 5.2% stakes, respectively as of end-March.

MBK and MegastudyEdu are known to have set the education firm’s value at between 1.8 trillion won ($1.4 billion) and 2 trillion won. This includes MegastudyEdu’s market cap of around 1 trillion won and the management rights premium, which is estimated at 80%-100% of the market cap.     

MegastudyEdu posted record-high performance in 2021. Its sales reached 703.8 billion won and operating profit amounted to 99 billion won. Its annual sales rose by 61% from the pre-pandemic level of 2019.

The education firm basks in the market's top spot as its competitors are confronted with financial difficulties.

Etoos, the No. 2 online education firm, garnered investors’ attention as PE firm Anchor Equity Partners became its second-largest shareholder in 2015 and secured management rights in 2019. Since then, however, it has experienced an erosion of capital. Skyedu, the market's No 3. firm, closed down last year.   

Chairman Son has attempted to sell the management rights only to find large valuation gaps between seller and buyers. The sales process was boosted, however, as MegastudyEdu’s market cap recovered to 1 trillion won as of Tuesday from 332.1 billion won in August 2019.

Megastudy was founded in 2000 by Chairman Son, who was a renowned lecturer of social studies subjects for Korea's annual college entrance exam, and another prominent lecturer named Cho Jin-man, with 300 million won in seed capital.

The firm grew rapidly and became the first private education company to go public, on Korea's secondary Kosdaq bourse in 2004. Chairman Son is expected to retire if the deal is closed.

MBK is expanding its portfolio in the education sector. It joined the race to acquire language learning business Wall Street English from Pearson in 2017 and bought China's Wendu Education Technology Group Co. via its Hong Kong affiliate in 2019.

Write to Jun-Ho Cha at chacha@hankyung.com
Jihyun Kim edited this article.