2U Weighs Potential Sale Under Activist Pressure

(Bloomberg) -- 2U Inc. has hired advisers for a strategic review after an activist investor pressured the educational software company to explore a sale, according to people familiar with the matter.

The Lanham, Maryland-based company is working with financial advisers to explore ways to improve its performance, including a sale, said the people, who asked not to be identified because the matter is private. A final decision hasn’t been made and 2U could opt to remain independent, they said.

2U shares climbed as much as 14% in New York trading Friday, giving the company a market value of $1.6 billion. The shares had fallen more than 60% in the 12 months through Thursday, including after it cut its financial guidance in July -- a move that saw the stock fall 50% in a day.

A representative for 2U declined to comment.

If 2U finds a buyer, the deal would follow the take-private of another company in the sector. Instructure Inc. agreed to sell itself to Thoma Bravo in December for about $2 billion. Instructure has said it spoke to 55 potential buyers during its sales process.

Activist investor Sachem Head Capital Management, which owns a 2% stake in 2U, has been pushing the company to explore a sale, people familiar with the matter said in November. The New York-based hedge fund believes the company, which helps universities launch online masters degree programs, is the top software provider in the space and would be an attractive takeover target for private equity firms or other education technology companies, the people said.

The investor believes the company, whose academic partners include Yale University, Northwestern University and Vanderbilt University, has seen its share price fall because of troubles related to communications and a failure to meet its earnings forecast rather than problems with the underlying business, they added.

The company has made some changes in management since revising its guidance in July. It appointed former Neustar Inc. executive Paul Lalljie as chief financial officer in October and appointed former SeatGeek Inc. executive Jennifer Ogden-Reese as chief marketing officer in November.

--With assistance from Kiel Porter.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Matthew Monks, Michael Hytha

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