Outsourcing giant Capita has agreed to sell its education platform division to private equity house Montagu for up to £400 million.
The company first revealed plans to sell its Education Software Solutions (ESS) arm to reduce its debts but initially struggled to gain a suitable price tag.
But on Monday a deal was struck with Tiger UK, a newly former company advised by Montagu.
The firm’s Sims (School Information Management System) platform is used in 21,000 schools across England, Wales and Northern Ireland.
As part of the deal Montagu will take over debts at the business to the tune of £57 million and pay a further £298 million on completion, expected early in 2021.
Montagu has also agreed to invest in ParentPay, a provider of education technology, and once completed, will fold ESS into it.
An additional fee of £45 million will be paid to Capita once Montagu’s agreed investment in ParentPay has been approved by regulators.
Capita said it will use the cash to strengthen its balance sheet and use £50 million to replace the remaining value of a financing agreement with the company’s pension scheme.
The deal will now go to shareholders to vote on the proposals for ESS, which saw pre-tax profits for the year to December 31 2019 hit £52.7 million.
Jon Lewis, Capita’s chief executive, said: “We are pleased to have agreed the sale of ESS to Montagu Private Equity after a comprehensive auction process.
“ESS is a business that Capita originally bought for £10 million so we have created significant value over 25 years of ownership.
“We announced our intention to sell ESS earlier this year, as part of our strategy to simplify and strengthen Capita.
“The sale will help us simplify by disposing of a standalone business, while the proceeds will help strengthen Capita’s balance sheet, as we build towards a more focused, sustainable business for the long term.
“At the same time, our colleagues at ESS will benefit from a new owner with the focus and means to support further investment and growth, as the business transitions to its next-generation cloud-native software.”