Byju’s In Acquisition Talks With 2U To Bolster U.S. Holdings

Byju’s In Acquisition Talks With 2U To Bolster U.S. Holdings

Indian digital education provider Byju’s has offered over $1 billion in cash to take over 2U, Inc. as part of its international expansion.

What is Byju’s?

Byju’s is an Indian multinational educational technology company. It was founded in 2011 by Byju Raveendran and Divya Gokulnath. After fresh funding rounds in March this year, the company received a valuation of $22 billion — roughly 25 times bigger than 2U, Inc. (NASDAQ: TWOU). The company’s expansion has been driven by acquisitions of smaller rivals and, in one case, a larger competitor. Since the start of the pandemic, Byju’s spent $2.6 billion on acquisitions, both internationally and domestically.

Why are Byju’s and 2U in the news?

Byju’s made an offer of $15 per share to the board of 2U last week — representing a roughly 47% premium on the company’s share price. This is part of the India-based start-up’s strategy to expand internationally through acquisitions, which is similar to the model it followed in its home market. However, the offer is not guaranteed as talks are in the early stages and could fall apart should 2U’s board refuse the offer. 

Byju’s initially entered the U.S market through the acquisition of Palo-Alto-based Osmo for $120 million back in 2019. The company has announced plans to complete several strategic acquisitions across all grade levels and launch a live online learning platform in North America called Byju’s Future School. The company had also been in talks with California-based Chegg (NYSE: CHGG), but they did not progress further. 

What does this mean for investors?  

In the short term, investors in 2U, Inc. are experiencing a significant increase in the value of their investment, which is currently down 46% year-to-date. Should the deal go ahead at the current price, investors will receive $15 for every share they own, which is roughly 85% less than the company’s all-time high in 2018. As talks are in the early stages, there is still a chance that there will be no deal. However, if one goes through it could be around a year before investors get paid, as the companies will have to file all the necessary paperwork and await approval from regulators. 

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