UPDATE 2-Princeton Review to buy online career education co
* Deal valued at $170 mln
* Says to fund the deal through debt and equity financing
* Deal represents diversification of business - CEO (Adds CEO comments; updates share movement)
BANGALORE, Oct 19 (Reuters) - Educational services company Princeton Review Inc (REVU.O) said it agreed to buy online career education provider Penn Foster Education Group Inc for about $170 million in cash, to tap the fast-growing online education market.
The whole career education market is going to be a robust, significant market over the next five years, particularly the online growth component of it, CEO Michael Perik said by phone.
The online education sector grew 13 percent last year and had been growing at about 20 percent in previous years. [ID:nN17215947]
Enrollment in online education schools is expected to grow about 18 percent in 2010, according to Gerry DiGiusto, an analyst with Eduventures, a higher education research and consulting firm.
Princeton expects the acquisition of Penn Foster, which is owned by private equity firm Wicks Group of Cos, to immediately add to its cash flow generating capabilities.
For 2008, Princeton Review reported about $139 million revenue, while Penn Foster had about $90 million in revenue for the year, the company said in a statement.
Princeton Review plans to fund the deal through $155 million of debt financing and $30 million of equity financing, led by Bain Capital Venture Partners and Falcon Investment Advisors.
Penn Foster, which operates three accredited educational institutions, will function as a standalone unit and will maintain its headquarters in Scranton, Pennsylvania, Princeton Review said.
The company expects to complete the transaction before year-end.
Shares of Princeton Review were up 4 percent at $4.71 Monday afternoon on Nasdaq. (Reporting by Amulya Nagaraj in Bangalore; Editing by Ratul Ray Chaudhuri)
