Carlyle debuts in Mexico

The Carlyle Group, a global private equity firm headquartered in Washington DC, has bought out a majority share in Universidad Latinoamericana SC (ULA), one of Mexico’s private universities.

Financial details for the investment were not disclosed. The firm acquired the stake from existing shareholders and expects the transaction to close by the end of this year upon receiving regulatory approval.

The acquisition of ULA is Carlyle’s first investment focused purely on Mexico. Carlyle, which set up its Mexico City office at the end of 2003, previously indirectly invested in the country when the Carlyle Partners III LP fund acquired Loews Cineplex Entertainment Corporation – which operates some theatres in Mexico – in July 2004.

ULA, established 30 years ago, is one of Mexico’s smaller private universities, with around 4000 students enrolled. According to Luis Téllez, a managing director at Carlyle’s Mexico City office, ULA has a “good name” but charges half the tuition rate of Mexico’s elite colleges. Carlyle’s plan for ULA is to give the university more of a technology focus and to build up infrastructure for teaching. The private equity firm also plans to open new campuses in addition to ULA’s current three campuses. Further down the road, the firm expects to exit the ULA investment through a trade sale to strategic investors seeking to enter Mexico’s education sector.

Through the ULA acquisition, Carlyle will enter Mexico’s higher education private sector, which Carlyle expects to experience explosive growth in the coming years. “There are two forces at work: demographics and per capita income,” says Téllez.

“In the next 10 to 15 years, the high school and college age population will be the highest in Mexico’s history, and Mexico’s per capita income – which is higher than Argentina and Chile, where a greater proportion of the population attends college – is also expected to increase,” says Téllez.

Meanwhile, publicly-funded higher education institutions in Mexico have limited capital and therefore is unlikely to be able to cater to the rising demand for college admissions, says Téllez.

Varel Freeman, managing director of New York-based private equity firm Baring Latin America Partners, identifies with the draw of Mexico’s education sector. “Prominent local businessmen have made a good business out of education, and our firm has looked at a number of investment opportunities in the education field,” says Freeman.

The Carlyle Mexico team, co-led by managing directors Téllez and Joaquin Avila, will focus on leveraged buyout opportunities in Mexico. A firm spokesperson confirmed The Carlyle Group manages a Mexico fund but declined to comment further.