After the listing, the acquisition strategy favors junior high school training institutions with revenues of 50 million yuan to 200 million yuan, because Midland English believes that the target PE can be acquired 6-7 times after 2 years.

Mandarin English, which has had its twists and turns on the road to listing, has new developments. The independent IPO prospectus was officially withdrawn on March 4 and opened to investors (from February 14 to March 9).

Midland English submitted its prospectus to the SEC as early as May 22, 2019. In December, it announced that it had signed a merger agreement with EdtechX Holdings and will complete its listing on NASDAQ by means of SPAC backdoor. The new company name is Meten EdtechX, and the stock code is NASDAQ: EDTX. The delivery and listing will be completed at the shareholders meeting on March 20.

Compared to domestic backdoor entities, EdtechX has only cash and no assets. The model is to raise funds before looking for the loading of the target. The blue cursor and United Family have used this listing method. It went public in 2018 and raised $ 65 million in IPO funding. The current stock price is $ 10.35 and the market value is $ 81.83 million. The value of Midland English in this transaction is US $ 535 million, and the market value of the new company is over US $ 600 million. The valuation is calculated at 19.3 times adjusted EBITDA in 2020 or 28.5 times adjusted net income in 2020.

After the merger and listing, the equity structure became Midland English holding 80.9%, EdtechX’s original public shareholders holding 10.1%, Italy’s largest independent asset management company Azimut holding 3.2%, new investors holding 3.2%, EdtechX initiated People hold 2.5%.

Midland English’s IPO target is US $ 110 million, including the US $ 65 million raised by EdtechX. Azimut invested US $ 20 million to become a cornerstone investor. Equivalent, Midland English only needs to raise another 25 million US dollars to complete the goal.

It is worth mentioning that Azimut has assets under management of more than 40 billion euros (312.7 billion yuan), and Anzhong Investment Management (Shanghai) Co., Ltd., established in China, obtained a private equity license in 2018.

Midland English was established in 2006 and started with adult English training. It cuts into small classes offline. In 2012, it entered the field of overseas study abroad exams. In 2014, it launched an online education platform-said immediately. In 2014-2015, it acquired Beijing Houde Study Abroad, and two other overseas study brands, Taiqi Education and Lewen Cair; acquired ABC Education Group (founded in 2002) in 2018 to expand English training for young children.

For the acquisition of ABC Education Group, Midland English acquired PS (sales ratio) is doubled. At that time, there were 21 self-operated learning centers and 4 franchised centers, which are expected to be profitable this year.

Mandarin English goes back-to-back, adultThe increase in business outside of English training depends on buying and buying

In the current income composition, adult English training accounts for 60%, youth English training accounts for 10%, overseas training accounts for 10%, online part accounts for 10%, and the remaining 10% consists of other English training. From the perspective of the trend, the online part has contributed the fastest growth, followed by the youth English training business.

The listing of Midland English backdoor goes one step further. The increase in business outside adult English training mainly depends on buying and buying.

Mandarin English has a total of 118,300 students in 2018, including 56,000 in the adult part and 45,000 in the online part. There are more than 8,000 young people and a test abroad. As of September 31, 2019, there are 150 learning centers across the country, Guangdong accounts for 60%, Beijing has 7 adult training centers and 19 youth training centers.

Midland English had revenues of 1.424 billion yuan in 2018 and a net profit of 53.44 million yuan. In the first three quarters of 2019, it had revenues of 105,900 yuan and a net loss of 59.552 million yuan. The adjusted EBITDA is expected to be 135 million yuan in 2020.

Midland English backdoor listing goes one step further. The increase in business outside adult English training mainly depends on buying and buying.

From the figure above, it can be found that before Q1 2018 of Midland English, both revenue and net profit were increasing simultaneously. But since then, revenue has fallen to varying degrees, and net profit has also been affected by a cliff-like decline. In particular, the net profit of Q3 2018 began to lose money because the acquisition of ABC Education Group dragged down its net profit and continued investment in online education.

The listing of Midland English backdoor goes one step further. The increase in business outside adult English training mainly depends on buying and buying.

In terms of the three fees, marketing expenses account for less than 30% of total revenue. In a single quarter, marketing expenses were around 100 million yuan, management expenses were around 70 million yuan, and R & D expenses were maintained at 6 million yuan.

At the roadshow, Midland English executives revealed that in the two weeks after the Spring Festival, total online cash income increased 287% year-on-year. In addition, starting from 2020, at least 30 learning centers will be opened each year in non-tier-1 cities. The investment cost of a learning center is 2 million yuan, which can generate profit in 15 months.

The selection criteria for non-first-tier cities are: the population exceeds 4 million, and the per capita GDP exceeds 3,000 yuan. At present, there are 100 cities in China that meet the standard. The net interest rate of Midland English is not 15% -30%. After the listing, the acquisition strategy favors junior high school training institutions with revenues of 50 million yuan to 200 million yuan, because Midland English believes that the target PE can be acquired 6-7 times after 2 years.