Korea’s Private Education Even Opens Carlyle Group’s Pockets

Elim Edu, a private institution for essay-type examinations listed on the KOSDAQ, received investment capital worth 10 million dollars (or 9.2 billion won) from Sunrise Overseas Ltd., a U.S. private equity fund, by recently issuing overseas convertible bonds.

Last year, the company also received investment worth 13 million dollars (or about 12 billion won) from OZ Management, an investment fund of Goldman Sachs, one of the world`s largest global investment banks. JF Asset Management, an investment fund in Asia of JP Morgan that invested in it in the first half this year, and reaped 40 percent of its earnings by selling stocks in no longer than six months. Park Jae-seong, IR deputy manager at Elim Edu, said, “Last year, my company did not attract domestic institutional investors as it was no longer an issue for administration, but foreign investors actively bought our stock so we successfully attracted investment.”

Foreign Funds: “Lured” to the Private Education Market –

Carlyle Group, one of the world’s largest private equity firms, invested 20 million dollars (or about 18.4 billion won) in a domestic private institute in May, which was major news in the financial market at home and abroad. The Carlyle Group, established in 1987, manages assets worth 56 billion dollars (or about 51.8 trillion won) as a leader in the private equity fund field. After acquiring Koram Bank in 2000, it sold it off to Citibank in 2004, reaping arbitrage of 700 billion won.

When the Carlyle Group is rumored to be considering investing in Korean education-related companies in the securities market, it was thought that the target company would be one of the 10 education companies listed in the stock market.

As things turned out, it was Topia Academy, a private institute that has never been talked over before. Topia Academy is a local after-school private education institute specializing in preparing students to enter special purpose high schools whose assets amounts to one billion won. The company received investment funds worth 19 times its asset from the Carlyle Group. The shares acquired by the Carlyle Group are valued at 30 percent, an investment of 62 times its face value. A venture company investing on such a scale is a rarity. One executive at a foreign securities company said, “Recently, as domestic institutional investors join in the domestic M&A market, it is hard to find investment targets in Korea that require such a small investment amount as in the aftermath of the 1997 Asian financial crisis,” adding, “Foreign funds see high growth potential in the Korean private education market compared to other industries.”

“Searching for the Second Mega Study” –

Domestic institutional investors that saw the legend of Mega Study, a private education institute listed on KOSDAQ in December 2004, are searching for the “second Mega Study” in the private institute field.

Gwon Seong-moon, chairman of the KTB Network, personally invested 10 billion won in Wise Storm, a local after-school private education institute specializing in preparing students to enter special purpose high schools. Wise Storm is in contact with foreign funds.

CDI Holdings, the parent company of Chungdam Language Institute, a well-known offline English education institute in Gangnam, successfully attracted a total of 24 billion won from IBK Capital and KG Investment Trust. Jeong Jae-won, general manager at CDI Holdings, said, “The amount of funding we have is superfluous, so we even turn down investment requests.”

Lee Chang-yong, professor at the department of economics at Seoul National University, said, “The Korean private education market is a unique industry of Korea that cannot be seen abroad,” adding, “It is an attractive investment destination where stable earnings are guaranteed for foreign investors well aware of Korea’s zeal for education who have chosen the private education industry in Korea.”