Chinese O2O English Language Training Provider Meten Files For US IPO

Meten International, a Chinese provider of online-to-offline (O2O) English language training (ELT) for adult students, has filed to raise $100 million in an initial public offering (IPO) in the US.

Meten seeks to acquire or invest in companies in the private ELT industry in China.

According to its US Securities and Exchange Commission filing, which was heavily redacted, Meten plans to list its American depository shares (ADSs) on the New York Stock Exchange under the symbol “MEDU” and has hired Citigroup, CICC, and Macquarie Capital as bookrunners.

The $100-million IPO target is likely a mere placeholder as the company, which claims to be ranked No. 1 in China’s offline general adult ELT market and online general adult ELT market in terms of revenue last year, has not specified the number of ADSs that it plans to list and the pricing for the listing.

Established in 2006, it offers a comprehensive ELT service portfolio comprising general adult English training, junior English training, overseas training services, online English training, and other English language-related services to students from a wide range of age groups.

It has a nationwide offline learning center network of 120 self-operated learning centers covering 26 cities in 14 provinces, autonomous regions, and municipalities in China, and 16 franchised learning centers.

As of March 31, 2019, Meten International had approximately 830,000 registered users on its platform and cumulatively over 160,000 paying users who purchased its online English training courses or trial lessons.

As of the same date, the cumulative number of student enrollments for its online English training courses since 2014 was approximately 98,000 and it had delivered over 2.8 million accumulated course hours to students online.

In its filing, Meten said it plans to use part of the proceeds to acquire or invest in companies in the private ELT industry in China and to establish new learning centers to expand its offline service network nationwide. It also plans to develop its junior English training service in terms of research and development of the relevant course content and technologies.

The company said its revenues increased from Rmb802 million in 2016 to Rmb1.15 billion in 2017 and further to Rmb1.42 billion in 2018, a 77.7 percent increase during the two-year period.

However, Meten said, in its filing, that its revenue decreased from Rmb332.4 million for the three months ended March 31, 2018 to Rmb314.8 million for the same period in 2019, mainly due to the introduction and implementation of the new curriculum for its general adult English training business.

Its online English training segment revenue increased from Rmb46.9 million in 2016 to Rmb121.2 million in 2017, and further to Rmb212.3 million in 2018, representing a 352.7 per cent increase.

According to a Frost & Sullivan study, China’s ELT market had grown at a compound annual growth rate of 19 per cent from 2013 to 2018 and is forecast to reach a total market size of RMb365.9 billion in 2023.

The increasing globalization and insufficient supply of effective ELT services in China have led to increasing demand for practical English learning in China, while the general ELT market is underserved with a low penetration rate of 2.1 per cent in 2018, according to the Frost & Sullivan Report, reflecting a substantial growth potential of the market.

A number of Chinese education platforms have raised funding recently, underscoring the growing demand for online education services in the country. In April, Beijing-based education services provider Gaosi Education Group raised $140 million in its Series D funding round led by Warburg Pincus.

Chinese K-12 education platform Yang Cong 345, known as Onion Mathematics, also raised Rmb300 million ($44.5 million) in a Series D funding round led by Primavera. Early this year, online tutoring service DaDa raised $255 million in a Series D round led by Warburg Pincus, with participation from TAL Education Company and Yonghua Capital.