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    WhiteHat Jr buy to help Byju’s ramp up its US play

    Synopsis

    The opportunistic play to acquire WhiteHat Jr by the country’s largest edtech company comes at a time when the firm was already in the market and negotiating with multiple private equity, venture capital and sovereign funds.

    The $300 million all-cash buyout is one of the largest internet M&A deals in recent times in India, which has been starved of exits for investors and founders.
    NEW DELHI: Byju’s acquisition of WhiteHat Jr, a platform that teaches coding to children, is expected to play a critical role in ramping up the Bengaluru-based unicorn’s presence in the US, as it seeks to go deeper in its most important international market.

    The $300 million all-cash buyout is one of the largest internet M&A deals in recent times in India, which has been starved of exits for investors and founders. The opportunistic play to acquire WhiteHat Jr by the country’s largest edtech company comes at a time when the firm was already in the market and negotiating with multiple private equity, venture capital and sovereign funds to secure a $50 million funding round at a valuation of about $300 million.

    WhiteHatJr was valued at around $30 million, or 213 crore, after its second and final funding round in August 2019. “Any good business will attract a lot of investors. But I felt that there won’t be a better partner than Byju’s. They have the same global expansion viewpoint and leadership, and there would be no additional benefits provided from a financial investor, in terms of impact and independence,” Karan Bajaj, CEO of WhiteHat Jr, told ET during an interview.

    byju-graph

    While investors like Nexus Venture Partners, Omidyar Network India and Owl Ventures — who together held 47% stake — will make a full exit, Bajaj — who holds 40% — and employees of the firm will receive a partial payout. Across two rounds, Nexus invested around $5 million in WhiteHat Jr, taking home $66 million in cash, while Omidyar put in around $3 million and will rake in about $45 million. Owl Ventures will get about $30 million, having invested $3 million in the company. “The last few months have been extraordinary. In March, we were at 300 people, and now we have about 3,000 people. Then, we had about 1,000 teachers on the platform, which now has 5,500 teachers,” Bajaj said.

    Byju Raveendran, CEO of Byju’s, told ET that it will add WhiteHat Jr’s products to its existing offerings, adding to those from Osmo, the educational games maker it acquired for $120 million last year. “This gives us an opportunity to accelerate our international expansion plans. The Osmo acquisition last year gave us a head start. So, we are not starting from zero when it comes to the US,” Raveendran told ET.

    The deal is the largest that Byju’s has undertaken so far. ET was the first to write about the transaction on July 3. “In terms of what they (WhiteHat Jr) have achieved in such a short span of time, it is very commendable. You won’t find too many companies achieving this sort of growth, not just in this sector but across all sectors, and that too, in two markets. It fits perfectly into our vision of giving students more, and getting them ready for the future,” Raveendran added.

    Byju’s is also believed to be looking for further buyout opportunities in the US, according to multiple sources, although Raveendran did not confirm the details. The company, it is believed, may raise debt from international financial institutions to fund future buyouts in the world’s largest economy.

    “We don’t have any acquisition target clearly identified. But as a market, we are clearly planning to go deep in the US…,” Raveendran said. The company is also reportedly in advanced talks to acquire Doubtnut, a Gurugram-based ed-tech company, for between $100-$150 million, expected to be an all-cash transaction as well.

    Byju’s has been on a fundraising spree since the beginning of this year, having raised an estimated $450 million from private equity major General Atlantic, New York-based investment firm Tiger Global Management and Bond Capital, the investment firm set up by Mary Meeker.

    It is also reported to be in negotiations to receive about $400 million from DST Global, the investment firm founded by Israeli-Russian billionaire Yuri Milner. Raveendran said equity financing will be used to fuel its inorganic growth going forward.

    “We have always maintained a strong cash balance. A certain percentage of our valuation is always kept in the bank. That, firstly, lets us think big, and secondly, make acquisitions fast. We are also raising cash for future acquisitions. As you know, most of them have been made using cash. We can move fast when the opportunity presents itself,” Raveendran said.

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