(Bloomberg) -- India’s biggest online-education startup Byju’s has signed a deal to acquire brick and mortar test prep leader Aakash Educational Services Ltd. for $1 billion, according to a person with knowledge of the talks.The deal will be one of the largest edtech acquisitions in the world and is set to close in the next two or three months, said the person, who didn’t want to be identified as the information is private.Bangalore-headquartered Byju’s is valued at $12 billion and has been on a fundraising spree as the pandemic has sent demand for its online lessons soaring. India’s second-most valuable startup is backed by the likes of Facebook Inc. founder Mark Zuckerberg’s Chan Zuckerberg Initiative, Tiger Global Management and Bond Capital, co-founded by Silicon Valley investor Mary Meeker.
Online education has become one of the hottest investment arenas during the pandemic, attracting investors betting that a prolonged lockdown will introduce parents and kids worldwide to a burgeoning format. That’s particularly true in India, where a scarcity of good teachers and quality learning material is encouraging students to try out widely accessible virtual classes. Byju’s itself has raised hundreds of millions of dollars over the past year from investors including BlackRock, Silver Lake and T. Rowe Price, while Unacademy in September secured financing in a round led by SoftBank Group Corp. at a $1.45 billion valuation.
While online learning startups have thrived, offline tutoring centers have been badly hit by the pandemic, which has closed schools and tutoring centers since March last year. Blackstone Group-backed Aakash Educational Services runs Aakash Institute, which has over 200 brick and mortar centers and tutors students to gain entry into the country’s elite engineering and medical schools. Its student count is over 250,000, according to its website.
In the deal with Byju’s, Aakash’s founders, the Chaudhry family, will exit completely, while Blackstone will swap a portion of its 37.5% equity in Aakash for Byju’s stake, said the person. A Byju’s spokeswoman declined to comment, while emails and calls to New Delhi-based Aakash Educational Services and its Chief Executive Officer Aakash Chaudhry did not elicit a response.
Byju’s was founded by Byju Raveendran, a former teacher and the son of educators, who conceived the smartphone app in 2011. The app caters to students from kindergarten to the 12th grade, and has been adding over 5 million users a month. India has about 250 million students in the K-12 grades. The app provides lessons in maths and science through video animations and games.
More than 70 million users logged in from over 1,700 cities around the country, Byju’s said last September when it announced a fund raise. Of these, over 4.5 million are paid users. It’s targeting doubling its revenues to $1 billion in the current financial year ending in March 2021.
(Updates with investments in online education starting in fourth paragraph.)
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