Byju’s has proposed to acquire American edtech company 2U for $2.4 billion in the largest acquisition in this space, two people aware of the development said.
Think and Learn Pvt. Ltd, which operates Byju’s, has launched massive fundraising to finance the acquisition. It has already approved a ₹5,547 crore private placement of shares and has separately secured a $2.4 billion acquisition financing commitment from US bank JPMorgan.
Once the board of 2U, which trades on Nasdaq, approves Byju’s offer, more US banks may join JPMorgan in a consortium for the acquisition financing, the people cited above said on the condition of anonymity. “Byju’s is in the final lap to acquire 2U. Therefore, entirely or a part of the equity capital of ₹5,547 crore could be used primarily for the acquisition of 2U,” one of the two people said.
“The board of 2U is going to meet shortly to discuss the offer made by Byju’s for the acquisition. Byju’s has offered a premium to the current valuation of 2U. But a pre-condition for the offer is that it has to be an all-cash deal since 2U is publicly listed in the US, and post-acquisition, it will become a privately owned entity. Once the 2U board clears Byju’s offer, the acquisition process should get completed within six months,” said the first person, adding he expects the fundraising to be completed in a few weeks.
According to regulatory filings, the Byju’s board approved the ₹5,547 crore fundraising through convertible preference shares on 27 June, a decision approved by its shareholders a couple of days later. Of this, Sumeru Global Digital Technology Fund will bring ₹1,147.48 crore, Byju’s Investments Pte. Ltd ₹3,200 crore and DRD Holdings SARL ₹1,200 crore.
“Our fundraising efforts are on track, and the majority of the $800 million has been already received. The balance is also expected soon. Our payments to Aakash are closed, and the audited financial results are going to be announced in the next 10 days,” a company spokesperson said, referring to the company’s March announcement on raising the amount.
A spokesperson for 2U declined to comment on what it termed as market speculation. An email sent to a spokesperson for JPMorgan did not elicit any response.
The acquisition of coaching company Aakash Educational Services has been delayed because of regulatory clearances, and the acquisition is likely to be completed by 23 August, the people cited earlier said.
Commenting on the recent news about layoffs, the Byju’s spokesperson said the company is, in fact, adding 800-1,000 people every month on a net basis.
Recently, some media reports said that Byju’s had fired 500-odd employees due to a shortage of capital.
“In fact, Byju’s total employee strength has gone up from 43,800 in November to around 51,000 at May end. Even in June, Byju’s hired 800 employees on a net basis. If 500 are leaving, 1,300 new employees are joining,” said the first person.
“In order to reduce redundancies across our organization after multiple acquisitions, we had to let go of nearly 1% of our over 50,000-strong workforce. This retrenchment was a result of a strategic decision to improve business efficiencies throughout Byju’s and its group companies. Byju’s remains a net hirer. We take immense pride in our role as India’s largest job creator among startups. Byju’s continues to hire across levels for various businesses, departments and functions,” the spokesperson said.
In 2022, Byju’s has allotted preference shares to at least seven entities, but the latest is its largest capital raising yet.
An acquisition in the US may open up a major revenue channel for Byju’s since the US market offers better user revenues than India and most other nations, holding out better income prospects for Byju’s.
Since it was founded in November 2011, Byju’s has chosen to grow through acquisitions. Last year, founder Byju Raveendran set a target of $1 billion in US revenue over three years. The 2U acquisition may catalyze this tried-and-tested strategy for Byju’s.
Last year, the company acquired Epic and Tynker, two American companies.