2U shares jump 20%; here is why

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2U Inc (NASDAQ: TWOU) stock jumped 20% after Indian online-education firm Byju offered to buy it in a cash deal valuing the US edtech firm at over $1 billion, according to a source familiar with the matter.

Bid values 2U at $2 billion

According to the source who sought to remain anonymous since the bid hasn’t yet been made public, Byju’s presented the board of 2U an offer of around $15 per share last week. The offer values the Lanham, Maryland-based business at approximately $2 billion, or a 61% premium to 2U’s Tuesday closing price of $9.3. 

Byju’s is among the most lucrative startups in the world, speeding its growth and expansion via acquisition with support from Mark Zuckerberg’s Chan Zuckerberg Initiative and Tiger Global Management. Byju’s was expected to make an offer either for 2U or Chegg Inc., according to a May Bloomberg story. However, the person claimed that discussions with Chegg, situated in Santa Clara, California, have not advanced.

If its board refuses the offer, the negotiations with 2U may still collapse, and a deal will not occur. The market value of 2U is currently $717 million, but it has over $1B in debt as well as other liabilities.

According to the source, Byju’s has funding of over $2.4B in place for whichever purchase it ultimately decides to pursue in an effort to accelerate its development and global expansion. Even though debt funding is pricier than it was three months ago, the source noted that transactions are still looking good and that assets are less expensive. Since reaching a top of $55.55 in early 2021, shares of 2U have dropped by over 80%.

Byju’s delaying payment for the acquisition of Aakash Educational services

According to persons with knowledge of the matter, Byju’s is delaying payment for a $1B acquisition of the test prep company Aakash Educational Services made last year. The sources indicated that Byju’s had requested a postponement of the payments till late August since authorities have not yet approved the transaction. They said that there was no liquidity crunch involved.

As per research firm CB Insights, Byju’s has a $22 billion valuation, making it the most valuable early-stage firm in India. Around 7 million of the 115 million students who use the edtech pioneer’s e-learning platform, formerly known as Think & Learn Pvt, make annual membership fees.

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