Vitru Limited enters into a definitive agreement for the
FLORIANÓPOLIS, Brazil, August 23, 2021 (GLOBE NEWSWIRE) – Vitru Limited, or Vitru (Nasdaq: VTRU), today announced that it has entered into a definitive agreement for a business combination, through its wholly-owned subsidiary Vitru Brasil Empreendimentos , Participações e Comércio SA, of 100% of the total share capital of CESUMAR – Centro de Ensino Superior de Maringá Ltda, or “Unicesumar”.
Unicesumar is a leading and rapidly growing higher education institution in Brazil focused on the distance education market, founded 30 years ago in Maringá / PR and run by the Matos family since then. As of March 31, 2021, it had 760 centers and 331,000 students, including 314,000 in digital education. According to the latest INEP higher education census published in September 2020 by the Brazilian Ministry of Education (Ministry of Education), or MEC, Uniasselvi and Unicesumar were respectively the # 1 and # 2 fastest growing institutions in the Brazilian private digital education market. Unicesumar also enjoys a strong presence in on-campus health-related courses, particularly medicine, with over 1,600 students in 348 current medical headquarters.1 which continue to gain momentum (with a potential of 50 additional seats in the near future).
Unicesumar has one of the highest quality standards in the Brazilian digital education segment. It was awarded by MEC with an Institutional Quality Score (CI) of 5 (maximum score) and an Average Student Development Score (IDD, or the quality indicator that measures the institution’s contribution to development. student) of 3.75 in distance learning in the last assessment cycle. It has also maintained an IGC level of “4” for ten consecutive years, an outstanding achievement in the industry.
Unicesumar’s current 12-month net sales (LTM as of March 2021) is BRL 762 million, while Adjusted EBITDA is BRL 260 million, which equates to a margin of ‘Adjusted EBITDA of 34%.2.
Unicesumar’s enterprise value is equivalent to R $ 3,228 million, representing an equity value of R $ 3,150 million, including the assumption of R $ 78 million of net debt to be adjusted at the balance sheet date. . Therefore, the implied EV / EBITDA LTM multiple is 12.4x. The expected EV / EBITDA multiples, after implementation of cost synergies (but before any commercial synergies) and continued maturation of the current Medicine headquarters, are 6.7x for 2023 and 5.7x for 2024.
On the closing date, 62.9% of the equity value will be paid in cash and 19.4% will be paid by the issuance of new Vitru shares. As a result, the current shareholders of Unicesumar will hold a 23.6% stake in Vitru. The remaining 17.7% of the equity value will be paid in cash 12 months after closing, adjusted by the Brazilian Consumer Price Index (IPCA). Vitru has secured a firm line of credit from major Brazilian banks totaling R $ 1.95 billion (five-year financing) for the transaction, to be disbursed at closing. We believe that the strong cash flow profile of both companies will allow for smooth deleveraging over time.
The agreement also provides for additional payments as follows: (i) a potential payment of R $ 1.0 million per seat for 50 additional medical seats subject to MEC approval, within 36 months of closure; (ii) 180 million reais in connection with non-compete obligations contracted by and between Vitru and certain leaders of the Matos family; and (iii) a price supplement of up to R $ 50 million linked to certain achievements as defined in the business combination, for two years after the closing date.
As part of the governance arrangements, Mr. Wilson Matos, dean and president of Unicesumar, will become the chancellor and vice-president of the board of directors of Vitru, and Mr. Weslley Silva, currently responsible for institutional relations of Unicesumar, will become a member of the board of directors. In addition, Mr. Willian Mattos, Head of Distance Education at Unicesumar, will be appointed Co-CEO of Vitru and will lead the company together with our CEO, Mr. Pedro Graça.
The transaction is subject to customary closing conditions, including antitrust regulatory approvals.
“Since our IPO, we have selectively researched dozens of M&A opportunities, examining the strategic rationale and value creation potential of each. From the start, it was clear to us that we didn’t want to grow in order to grow, but rather we needed to look for companies that shared our values and beliefs about the power of high quality education in the lives of our students. We believe we have found this ideal partner at Unicesumar. This deal is a transformational deal for us, consolidating Vitru (through Uniasselvi and now Unicesumar) as what we believe to be the best and fastest growing digital education player in Brazil. It also allows us to enter medical education, a resilient and highly profitable segment. We are very grateful and honored for the trust placed in us by the founding families who created Unicesumar 30 years ago and who are committed to carrying on their legacy and maintaining its culture of success in the future, ”said Pedro Graça , CEO of Vitru Limited.
According to Professor Wilson Matos, “When we founded Unicesumar, reaching Brazil and the world from Maringá was a distant dream that gradually became a reality. Our story is based on quality education and provides the best experience for our students, whether in on-campus, digital or hybrid models. We have always invested heavily in infrastructure and technology to support the advancement of our businesses. It is with these values that from 2018 we began to prepare for a possible IPO. In this journey, we also assessed a possible commercial merger with an already listed player in order to save time and maximize our strengths. We have found in Vitru the ideal partner, with similar values and culture, to build together the best educational group in this country. I have no doubt that together we will maintain the best quality indicators in the sector and provide individuals who are better prepared for the job market ”.
Vitru is the leading pure distance education group in the post-secondary distance education market in Brazil. Through its invested companies, Vitru provides a comprehensive educational ecosystem focused on a hybrid distance learning experience for undergraduates and continuing education students.
Vitru’s mission is to democratize access to education in Brazil through a digital ecosystem and to empower each student to create their own success story.
Special Note Regarding Non-GAAP Financial Measures
This press release presents the Adjusted EBITDA (unaudited and preliminary) and Adjusted EBITDA margin (unaudited and preliminary) for the twelve months ended March 31, 2021 as reported by Unicesumar for the convenience of investors, who are non-GAAP financial measures. A non-GAAP financial measure is generally defined as a measure that purports to measure financial performance but excludes or includes amounts that would not so adjusted to the most comparable GAAP measure. Unicesumar calculates Adjusted EBITDA as net income (loss) for the period plus deferred and current taxes, financial results and impairment and amortization, normalization of the compensation and benefits of certain executives, and of other adjustments. Unicesumar’s adjusted EBITDA as (preliminarily) measured by Vitru presented here reflects certain estimated adjustments, including additional provisions for bad debts, the capitalization of certain amounts in intangible assets and other adjustments, so the measurement is comparable to that presented by Vitru. Unicesumar’s Adjusted EBITDA margin presented here has been calculated as Adjusted EBITDA divided by net sales as reported by Unicesumar. These non-GAAP financial measures have been presented by the management of Unicesumar, are unaudited and are preliminary and do not replace IFRS measures of earnings. Finally, the Adjusted EBITDA and Adjusted EBITDA Margin calculations presented here may differ from the calculation used by other companies, including our competitors in the education services industry, and therefore the metrics. may not be comparable to those of other companies.
This press release contains “forward-looking statements” within the meaning of US federal securities laws. Statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate”, “believe”, “continue”, “expect”, “estimate”, “intend” , “Project” and similar expressions and future or conditional verbs such as “will”, “would”, “should”, “could”, “could”, “can”, “may” or similar expressions are generally intended to identify forward-looking statements. These forward-looking statements speak only as of the date hereof and are based on Vitru’s current plans, estimates of future events, expectations and trends that affect or may affect our business, financial condition, results of operations, cash flow, liquidity, prospects and the price of Vitru’s common shares, and are subject to several known and unknown risks and uncertainties, many of which are beyond Vitru’s control. Accordingly, current plans, planned actions and future financial condition and results of operations may differ materially from those expressed in the forward-looking statements in this press release. You are cautioned not to place undue reliance on these forward-looking statements when evaluating the information presented. Vitru assumes no obligation to publicly update or revise any forward-looking statements after the issuance of this press release due to new information, future events or other factors.
1 Excluding FIES and PROUNI seats
2 Preliminary and unaudited figures, subject to adjustments to comply with Vitru accounting practices and PCAOB standards