PHINMA Corporation [PHN 21.00 unch; 48% avgVol] [link] disclosed that its education arm, PHINMA Education Holdings (PEHI) had closed its stake sale to American private equity firm KKR. Under the deal, PEHI sold P3.59 billion primary shares to KKR and another P0.90 billion primary shares to a fund called Kaizenvest. KKR also entered into agreements to acquire all of the secondary PEHI shares owned by several development banks and funds like ADB that invested in PEHI back in 2019. Upon this closing, PEHI received an initial payment of P2.52 billion from KKR. PHN said that it now owns 66.41% of PEHI’s outstanding shares. PHN is
MB BOTTOM-LINE: This deal with KKR is ultimately what killed PHN’s push to IPO its education arm. Perhaps “kill” is a strong word, because KKR is a "financial investor", and financial investors (especially large American ones like KKR) are only in it to make money. They’re not like a strategic investor that hopes to marry its skills and network to grow and improve the business over the very long term; KKR is interested in earning multiples of its investment through some medium-term “exit”. The most common way for financial investors to exit a large position like this is through an IPO, so PHN will now cause PEHI to use the proceeds of this sale to improve the company’s valuation ahead of bringing PEHI to market to allow KKR to exit. From PHN’s perspective, it’s a win-win, as they get to use KKR’s money to build/improve the business and both PHN and KKR stand to benefit if/when the spin-off IPO of PEHI takes place. As PEHI said in a recent article, they’re now considering 2027 to 2029 to be the new PEHI IPO window. It’s possible to list the company earlier if conditions make it profitable. It's also possible things go sideways and they need to find a new financial investor to step in to carry the bags. PHN is up 133% from its COVID-crash low, up 3% year-to-date, and up 8% since June. One of PHN’s peers, STI Education [STI 1.33 unch; 21% avgVol], is up 250% from its COVID-crash low, up 175% year-to-date, and up 45% since June. The education sector is hot, but some stocks are just hotter than others.
Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.