Pearson acquires 76% stake in education firm Tutorvista

The fast growing education sector, both domestic education and outsourced education services, has seen a number of new entrants in recent years. Pearson’s acquisition of Tutorvista highlights the interest of foreign companies in this sector and the potential in the sector, as evident from the size of the transaction.

Pearson, a leading education company and a renowned global media and education group, is acquiring a majority stake in Tutorvista, a Bangalore-based online education company. Pearson had acquired a minority stake in the company. It had invested Rs 54 crore in Tutorvista for a 17.2% ($12 mn) stake in June 2009.

Now it has acquired a controlling stake of 76% in Tutorvista, with the additional 59% stake costing Rs 577 crore ($127 mn). The equity valuation of the company works out to about $213 mn (or Rs 960 crore). The idea behind the acquisition is to integrate the online tutoring business of Tutorvista with the digital products of Pearson, and then market it to schools and higher educational institutions.

This merger has various synergies. Both companies are in the business of education, and are strong brands. Pearson is a strong brand in the education sector, in developed markets. Tutorvista has made a mark for itself, with 2000 teachers spread across India, US, UK, Australia, China and South East Asia. Though the company has been founded recently in 2005, it claims to provide online tutoring to 10,000 students a month. Edurite, the Indian subsidiary of Tutorvista manages sixty education centres in Karnataka and Kerala. The fast track growth of both Tutorvista and Edurite is the main reason behind the integration of the same into Pearson’s business. The management of Tutorvista has indicated in this report on, that Pearson might increase its stake to 80% in the company by February end.

On the other hand, the increase of stake provides an exit route to the investors – Sequoia Capital, Lightspeed Ventures, Silicon Valley Bank and Manipal Education, which played a key role in setting up the business of Tutorvista by providing $33 mn in funding over the last five years.

The Pearson stock (ADR) reached a 52 week high of $16.17 on NYSE (New York Stock Exchange), and is currently trading at $16.14, marginally above its previous close.

Read the press release from Pearson.

Comments are closed.