Australian buyout major Pacific Equity Partners (PEP) is acquiring educational resources supplier Modern Star from Malaysia-headquartered private equity firm Navis Capital Partners for an enterprise value of $600 million, according to an announcement.
The transaction is expected to close in Q4 2020.
Modern Star, which sells education equipment such as furniture and toys to early childhood learning centres, has a growing presence across Asia, including China, Hong Kong and Singapore.
Modern Star is PEP’s first investment from its new A$2.5 billion ($1.79 billion) buyout fund, Fund VI that closed in August. Limited partners include the New York State Teachers’ Retirement System, which committed A$200 million to the fund last year.
Kuala Lumpur-based Navis acquired Modern Star in 2014 in a deal reportedly valuing the latter at up to A$215 million. Since then, Navis has been instrumental in transitioning the business from a traditional B2B supplier to a digitally enabled e-commerce provider of education resources.
As part of the transaction, Navis will retain its stake in Modern Star’s China business (Wisdom).
“The business also performed strongly during COVID-19, demonstrating the resilience and diversification of the B2B platform. We wish the management team all the best as Modern Star embarks on the next phase of its growth journey with PEP. As for Wisdom, we continue to see strong growth prospects for the brand and the long-term macro thematics underpinning the kindergarten sector in China,” said Philip Latham, Head of Navis Capital Australia.
PEP is an Australian private equity firm, which oversees A$5.5 billion ($3.6 billion) of AUM and is currently investing from its sixth and seventh funds. It seeks to achieve long-term average profit growth of 15-20 per cent and annual leveraged returns of 25-30 per cent.
PEP Fund VI, with its parallel vehicles, will continue to invest in underperforming market leaders, predominantly in Australia and New Zealand, with the likelihood of significant co-investment opportunities. Its predecessor, PEP Fund V, closed in 2015 at A$2.1 billion ($1.5 billion).
Founded in 1998, Navis manages approximately $5 billion and focuses on investments primarily in and around Asia. Navis has conducted over 80 control transactions across the Asian region completed since its establishment.
Quoting sources, DealStreetAsia reported on Aug 22 that Navis, which is in the process of raising its eighth fund, is understood to have extended the fundraising to next April. The firm is seeking up to $1.9 billion for Navis VIII. It is learnt to have raised over $1 billion for this vehicle by 2019-end. Navis started marketing the fund around the second half of 2018 and was expecting a final close by end-2019.
As DealStreetAsia reported earlier, the new fund is expected to cut cheque sizes of between $50 million and $150 million. The firm is also likely to make smaller investments, in the $25-50 million range, to bridge a funding gap it sees as largely unaddressed by other investors in the region.
It was reported in August that Navis Capital took a majority stake in Malaysian scaffolding and construction equipment solutions provider Dscaff. In the same month, Navis Capital Partners reportedly sold its entire stake in Malaysian IT firm Strateq to a unit of Singapore-listed telecommunications company StarHub.
It was reported in February, Navis Capital and the other owner of Malaysian private tertiary education group SEG International Bhd. were considering selling their stakes.
In January, quoting sources, DealStreetAsia reported that Navis Capital was exploring a sale of its stake in Indonesian medical equipment distributor PT Tawada Healthcare. In 2019, Navis invested in Vietnam’s private education platform Thanh Thanh Chong Education JSC as well as Thailand’s food processing company Srithai Daily Foods.