Tarena's Buyout Deal Officially Off; A New Growth Plan Needed

As the deal is off, Tarena gets a $3.5 million settlement. Now, the Chinese educator prepares to release its Q3 financials - and really needs to impress investors with a new plan.
Nov. 15, 2021 12:04
Tarena's Buyout Deal Officially Off; A New Growth Plan Needed

(CapitalWatch, Nov. 15, New York) Tarena International Inc. (Nasdaq: TEDU) is to remain a U.S.-listed company as its buyout deal has officially been terminated.

These days, the buyout of $4 per share may indeed seem too good to be true for Tarena. Lately, TEDU shares are barely reaching 80 cents apiece. Its stock tumbled significantly when Tarena said in early October that the privatization deal may be called off; but the biggest decline was witnessed as China's caps on private tutoring went into effect over the past few months.

The buyout agreement was announced in early May – at the time, the news uplifted TEDU to $3.88 a share. Today, however, Tarena said that it and the buyer group, which consisted of founder and chairman Shaoyun Han, Ascendent Capital Partners III, L.P., Kidedu Holdings Ltd., Kidarena Merger Sub, and Kidtech Ltd. "have mutually agreed to terminate the previously announced Agreement and Plan of Merger."

According to the statement, the company and buyer group "were in disagreement on specific terms and conditions within the Merger Agreement." Upon discussions on the issue, the deal was called off and the parties' obligations as per the agreement have been released, Tarena said.

In terminating the deal, Tarena will receive a settlement of $3.53 million from the buyer group by Nov. 26. Tarena said the settlement is in the interests of the shareholders.

The company ended on a positive note, saying that it expects its third quarter revenue to exceed the results of the second quarter. Tarena said earlier that it will release its Q3 results on Nov. 23 before markets open.

In late October, Tarena announced its expansion into adult professional education, childhood & adolescent computer coding, and robotics programming courses, robotics competitions and training camps. The company has partnered with Xueda Education Group, which will help with "student recruitment, marketing activities and the provision of classroom area and relevant facilities."

Before Beijing's massive crackdown on private tutoring in China, Tarena positioned itself as a provider of professional and K-12 education services. The crackdown, which was previously one of China's most lucrative and fastest-growing, pretty much killed the K-12 tutoring market and companies had to restructure, while learning centers shut down, workers took to the streets in protest, and students' parents stormed schools demanding their prepayments back.

In pre-market trading, Tarena's shares were at 82 cents a share. If the company fails to impress investors with its Q3 results next week and a clear plan to grow its business, it may face a delisting from the Nasdaq not because of a buyout but because of failing to meet the minimum stock bid requirement.



Topics:
TEDU, Tarena, China, Education