For-profit Educate, Inc., goes private (Sylvan Learning, Hooked-on-Phonics)

Educate, Inc., the parent company of Sylvan Learning Centers, traded for the last time on the NASDAQ exchange yesterday.

No, the company didn’t go out of business. It was taken private by its management, after being a public company for three years. From the Baltimore Sun morning e-mail:

Educate becomes a private company

Educate Inc. has completed its transition into a private company, ending its three-year run on public markets.

Best known for its Sylvan tutoring centers, the Baltimore company, which was purchased in a management-led buyout, traded for the last time on the Nasdaq yesterday.

The investor group that purchased the company is led by chief executive officer R. Christopher Hoehn-Saric, other executives and affiliates of Sterling Capital Partners and Citigroup Private Equity. They paid $8 a share for the company in the deal valued at $535 million.

The company announced this week that more than 75 percent of shareholders approved the deal, which came as the firm has struggled with poor product sales.

Internal reorganization was swift.  The company’s website carried this note this morning:

On June 13, 2007, through a merger transaction, Edge Acquisition, LLC became the owner of Educate, Inc. In a related series of simultaneous transactions, the companies which were part of Educate, Inc. have been split into the following independent companies:

  • Educate Services, which includes Sylvan Learning, Catapult Learning, and Schulerhilfe;
  • Hooked on Phonics, Inc., which includes Hooked on Phonics, Reading Rainbow, and GPN;
  • Educate Online, Inc., which includes Catapult Online and eSylvan;
  • Progressus, Inc.; and
  • Educate Corporate Centers Holdings, Inc., which is a franchisee of various Sylvan Learning and owner of Sylvan Learning Centers.

The companies are now operating independently to better serve students, families and schools across the country. To learn more about the merger and related transactions, click here.

Making a profit delivering education is rare.  Milton Friedman notwithstanding, free market rules do not apply to educational enterprises in the same way they do to other services.  This is one more example, or set of examples, that should give pause to any rational person considering making public schools “compete” for money to improve education for any child, especially any group of children.  Sylvan Learning Centers are considered to be the top of the heap in their niche; Hooked-on-Phonics is a cliché success story.  And they “struggle with poor product sales.”

I hope the company finds the education answers, the magic bullets, and can retail them at affordable prices.

The answer, by the way, probably is not 42.

One Response to For-profit Educate, Inc., goes private (Sylvan Learning, Hooked-on-Phonics)

  1. Ed says:

    Haven’t researched this case, but you might look deeper at the actual reasons for going private. This is becoming increasingly popular. One reason, as the SEC wesbite itself points out, is Sarbanes-Oxley and its costs: Going Private: A Reasonsed Response to Sarbanes-Oxley? – SEC …(

    But, as the Chrysler decision brought out, the short term focus of the public capital markets on quarterly reporting has become an increasing problem over the years. CEO’s increasingly feel this pressure, and feel frustrated with its effect on the long term health of the company.

    There is simply no reason to assume that God has suspended the laws of economics in the singular case of education. Economics applies in health care, the arts, retirement, and care of the indigent; the same laws apply to education.


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