2U Inc. has closed an $800 million deal to acquire almost all of online education company edX Inc.’s assets.
The previously announced agreement will increase the size and scope of Lanham-based 2U’s work, allowing it to reach a total of 40 million users at a time when remote learning technology is in high demand. Now, 2U (NASDAQ: TWOU) will have 230 partners, including colleges and universities, and offer more than 3,500 courses.
EdX, based in Cambridge, Massachusetts, will become the “primary brand for products and services,” while 2U will remain the parent company. Working arrangements will remain as they are for now, 2U said.
Originally founded in 2012, edX began when professors at Harvard University and MIT decided to teach a university course online for free to anyone who wanted to view it. It has since expanded into the rapidly growing industry of online education, operating as a nonprofit that will remain based at the two founding universities and will continue to develop Open edX, an open-source platform, using funding from the transaction's proceeds.
Meanwhile, edX, will operate as a public benefit company under 2U, per their joint agreement.
“There is an urgent need across society to make learning affordable, accessible and equitable — for all learners, at every stage of life,” 2U CEO and co-founder Chip Paucek said in a statement. “That’s the mission we now advance together, helping higher education institutions and employers build a sustainable future.”
Anant Agarwal, who founded edX and led it as its CEO, will become 2U’s chief open education officer, reporting directly to Paucek. JP Beaudry, edX’s chief technology officer, will join 2U in that role, replacing the local company's former CTO, James Kenigsberg, who resigned effective this past Wednesday, according to a Securities and Exchange Commission filing.
Upon his departure, Kenigsberg signed a separation and consulting agreement with 2U that keeps him as an employee through Jan. 2 and, then, as a consultant through Jan. 2, 2024, for $60,000 in annual pay, per the SEC filing. After his consulting period ends, he will receive another $50,000 one-time payment, under the agreement.
In addition, edX Vice President of Product Lauren Holliday will join 2U, serving in a newly created role of managing director of open courses and marketplace. The local company also said any employees who don’t remain with the nonprofit under the Harvard and MIT umbrellas can transition to working at 2U, which said it expects a total of 225 edX employees to come aboard. The new employees won't be required to relocate, as 2U will keep edX's current office in Cambridge and doesn't have any plans to expand its Lanham headquarters.
The deal was originally announced over the summer. 2U said it plans to pay for it in cash and with a $475 million term loan. In all, the company said last week that it counted $934.3 million in cash and equivalents as of Sept. 30.
This comes as the company already saw a third-quarter revenue bump of about 10% to $232.4 million, helping lift its total revenue for the first nine months of 2021 to more than $702 million, a 25% boost from the same period last year. 2U also narrowed its overall losses from January through September, from $178.8 million last year to $127.5 million this year. It expects to keep those losses within a range of $190 million to $200 million for the year, while bringing in anywhere from $935 million to $955 million in yearly revenue — representing a roughly 22% jump from the prior year.
Still, not everything has been on the rise. 2U, which has a market capitalization of nearly $2 billion, has seen its stock price undergo a slow, but steep, decline in recent months, from $42.08 per share when the deal was announced in late June to $26.51 apiece today.
