IT training company NIIT Ltd has sold its US-based unit Element K business, which was housed under its subsidiary NIIT Ventures, Inc., to the parent company of SkillSoft Limited, a leading SaaS provider of on-demand e-learning and performance support solutions in a $110 million cash deal.
The transaction sent the share price of the company soaring nearly 20 per cent in early trades on Monday.
NIIT acquired the Element K business, which was tipped to be North America's largest learning solutions provider, for $40 million back in July 2006. The business had revenues of $86.2 for fiscal ending March 2011 with a positive EBITDA of $2.3 million.
This means the latest transaction values the firm at 48x its previous fiscal's EBITDA and around 1.3 times revenues.
Going by earlier reports, the business has not seen much revenue growth since NIIT's buyout of the company over five years ago. It had revenues of $80 million 2006, and the current run rate represents growth of under 8 per cent. Element K had revenues of $87.4 million in 2009 which fell to $78.3 million in 2010 before increasing to $86.2 million in 2011.
Around 50 per cent of the revenue comes from e-learning, while 40-45 per cent from print content and the rest from custom development services.
NIIT Ltd shares were trading at Rs 49.8 on BSE, up by 14.22 per cent at 12:46 pm on Monday. The scrip hit an intra-day high of Rs 52.3 on news of the sale. The share price of group company NIIT Technologies was also trading up by 3-4 per cent.
NIIT has also entered into strategic long-term services and licensing agreements with SkillSoft under which the Indian firm will become a product development partner for its e-learning content collections for business, IT and desktop skills.
"NIIT has made a strategic commitment to expanding its managed training services business as a key platform for growth. This partnership will enable NIIT to rapidly expand its managed training services business," said Vijay Thadani, CEO of NIIT.
In a similar transaction, ICICI Group-backed IT & ITES firm 3i Infotech sold its US-based Global Billing & Payments unit, comprising Regulus Group and J&B Software, to an affiliate of the private equity firm Cerberus Capital Management for $137 million in May this year.
BPO firm Firstsource is also reportedly in talks to sell US-based MedAssist, a health care business that it acquired in 2007 for $330 million.
The acquisition adds to SkillSoft's existing offerings in learning content and learning platform technology through the addition of Element K's complementary offerings in e-learning content, virtual labs, ILT print materials and custom development services.
SkillSoft is funding the deal through available cash balances and additional bank financing of approximately $90 million.
"Also, the addition of Element K employees in sales, customer support and product development strengthens SkillSoft's long-term ability to compete for a greater share of the $48 billion global corporate training market that includes many larger players with more comprehensive product offerings," said the company in a statement.