All bets are off. At the time of publishing this article, the shareholders of Software Luxembourg Holding, the Luxembourg Soparfi that has presided over Skillsoft's destiny since last September, have been invited to vote for or against the merger with the American Spac Churchill Capital Corp II by mail, ahead of the virtual general meeting that is being held today. There is little doubt that the idea of creating the global giant of individual professional training with the enormous envelope of one and a half billion dollars holds out enough promise for the vote count to go as planned.
It's not that time is running out, but the covid pandemic has upset the schedule of an operation that was born exactly two years ago. An "empty shell”, a "special purpose acquisition company", or Spac - named Churchill Capital Corp II decided to raise funds on the New York Stock Exchange. With $697 million in their pockets, its promoters, including Wall Street veteran Michael Klein, set out to find a "target", a technology company that needed capital to boost its growth. They spotted Skillsoft, a company born at the dawn of the 2000s and specialising in professional training, which has 45 million customers, including 70% of the Fortune 1000, and is fairly profitable... but is struggling to survive in the face of $1.5 billion in debt.
In June 2020, it filed for protection from the US authorities and in two months obtained $187 million from its usual lenders and a debt restructuring, reduced to three times Ebitda. Gone are the small shareholders...
A deal with four entities
Just out of the US process, the company's CEO and chairman, Ron Hovsepian, took over the reins of a Luxembourg soparfi created by Exequtive Partners (Luxembourg), itself wholly owned by JTC Group since its acquisition in 2019.
Obviously, last autumn, when discussions began between the Spac and Skillsoft's management, the package had to put the company back on track financially.
The initiators of the project put their hands in their pockets and offered $233 million to acquire Global Management, the world leader in IT training, present in 100 countries, with 3,000 unique courses given by 1,100 experts. A white knight was found in Prosus, the Dutch holding company of Naspers, which owns 28.9% of Tencent, 24.4% of Deliveroo and 29.1% of Mail.ru, to name but the best known. And who, above all, is ready to contribute $130 million in equity (the Pipe), then another $400 million. At $1.5 billion, everyone agrees.
Spac to come at Mazars
"This is not the first time that an American Spac has stopped at a Luxembourg target," says Fabien Delante, auditor and leader of the Spac team at Mazars in Luxembourg. "The Arrival deal , the start-up specialising in the transport of the future, with a target valuation of around $5.3 billion, had already raised more than $600 million through a merger with a Delaware-based Spac (CIIG Merger Corp)". While a member of his team, Sumer Chopra, a Spac expert in Mazars Luxembourg's Valuation & Capital Markets unit, reminds us that the idea of a Spac, attractive on paper, depends on the reputation of its promoters and their ability to generate interest and attractive prospects. Delante confides that Mazars Luxembourg has been able to raise more than $600 million through a merger with a Delaware-based Spac. Delante adds that Mazars Luxembourg is currently involved in a number of deals involving a Luxembourg Spac that are in the process of being listed on the Frankfurt or Amsterdam stock exchanges, which will undoubtedly put Luxembourg on the European Spac map. "There is also a difference between European Spac and American Spac," explain the two experts. The Europeans are looking for targets in Europe, while the Americans are looking for targets all over the world.
With revenues this year expected to reach $650-680m, and $700m next year, as well as an Ebitda margin of 25%, Skillsoft is valued at 12 times its Ebitda in 2020 and can rely on its platform launched in 2017, Percipio, which generates subscription renewals of 100%, even though it only brings together 50% of its customers. The companies' share price was fairly quiet. The only real uncertainty remains: what will the management of the new CEO, Jeffrey Tarr, be like? On 7 June, he unveiled some of the faces of his new team. With almost 200,000 e-learning tools in 29 languages, SkillSoft will be ready to challenge any competition in early 2022, when all the procedures are completed.
According to the 2020 Deloitte study "Global Human Capital Trends", 74% of companies are considering training, but only 9% are ready.