PEP grabs Modern Star education business

Modern Star underwent a refinancing of about $300m of debt last month. Picture: iStock

Pacific Equity Partners has aquired Modern Star’s Australian education business for about $600m from Navis Capital.

It comes after the adviser for Navis, Morgan Stanley and Luminis Partners ran a sales process for the business last year that was suspended due to COVID-19.

Working for PEP was investment bank UBS and it is understood the finishing touches were put on the transaction on Monday.

Modern Star underwent a refinancing of about $300m of debt last month in a move undertaken by former UBS corporate lending operative Kelly Morton of Skye Capital.

Last year, it was understood that Navis was searching for about $1bn for the entire business, and after a buyer could not be found for all the assets in one line, a break up was mooted where the China operations would be sold off separately to those in Australia.

The sales process last year attracted a disparate group of buyers, including private equity firms Permira and PAG, Japanese trade players such as Benesse and Bunzl out of London.

The understanding is that most parties wanted either the Australian or the Chinese component and PEP is acquiring only the Australian assets.

Last year, Modern Star’s overall operations generated about $55m of earnings, but the sector has been hit hard by the global pandemic.

The company’s large Chinese presence accounts for about 20 per cent of the overall operation.

It has been described as a leading Australian business-to-business distributor of education resources and is moving to consolidate.

The acquisition marks a move back into the education space for PEP, which purchased New Zealand business Academic Colleges Group in 2015 for at least $NZ500 million and had plans to roll out the business internationally once it had grown further across the Tasman.

Pacific Equity Partners sold part of the operation in 2018 to Inspired Schools in Britain for about $600m.

That sale consisted of the secondary schools within the business. The remainder consists of tertiary education, and has been rebranded Up Education.

Rothschild last year had been working on a sale of the remaining assets.

The business is New Zealand’s largest private tertiary education provider, offering certificate, diploma and degree qualifications at 13 different colleges.