After more than 30 years in business, Learning Tree International has slapped a ‘for sale’ sign on itself. The IT training shop has retained RBC Capital Markets to guide the process, which comes as the company has only partly worked through a turnaround. It suffered through several years of stagnant revenue and negative operating margins, when the Internet bubble burst and companies cut back sharply on their IT staff members, which, at the time, were Learning Tree’s only customers. (The company has since expanded into management training as well.)
The timing of the possible sale is curious. Learning Tree has come up short of Wall Street estimates for two straight quarters, leaving the company’s stock below where it started the year. (Even with the bounce on May 28 from investors betting on an acquisition, Learning Tree shares have dropped nearly one-quarter of their value in 2008.) Learning Tree currently sports a market capitalization of about $290m, but holds $57m in cash and no debt, lowering its enterprise value to $233m. The company will likely record about $190m in sales in the current fiscal year.
Given the current valuation, maybe some of the executives should take a Learning Tree course on maximizing shareholder value. Of course, the top two executives have a distinct interest in maximizing shareholder value, given that they own nearly half of the company’s 16.6 million shares. Learning Tree cofounders David Collins and Eric Garen own 25.6% and 20.4% of the company, respectively. And if that weren’t motivation enough, we couldn’t help but notice a kicker that could put even more money into the executives’ pockets: The company approved a bonus of one year’s worth of salary for executive officers if Learning Tree gets sold before the end of next March. So, the sellers are ready, but where are the buyers?