Chegg, Inc. (CHGG) has acquired leading language learning platform Busuu, and announced an accelerated share repurchase worth $300 million. Shares of the education technology company jumped 2.8% on November 29, and gained another 2.1% during the extended trading session.
Acquisition of Busuu for $436M
Founded in 2008, Busuu is a content-rich education platform for language learning. It offers courses in 12 different languages with 20,000 new registrations daily. With over 500,000 paying subscribers, it has served more than 120 million learners across over 160 countries.
Aiming to increase its total available market (TAM) and serve more learners around the world, Chegg acquired Busuu for approximately $436 million (€385 million) through an all-cash transaction.
Through the acquisition, Chegg plans to strengthen its foothold in the potentially growing digital language learner market and expand the scale of its current offering.
Notably, the digital language market is currently worth $17 billion and Chegg expects it to triple in size in the coming five years. Additionally, Chegg projects Busuu to report revenues of $45 million in the full-year fiscal 2021, implying year-over-year growth of over 20%.
The acquisition is expected to close in the first quarter of 2022, subject to certain regulatory approvals.
Buybacks worth $300 Million
Chegg also announced that its Board has approved an accelerated share repurchase to buy back shares worth $300 million.
Earlier in November, Chegg announced a share repurchase program of $1 billion. As of September 30, 2021, the pending authorization for repurchases was $665.5 million under the same program.
Chegg CEO, Dan Rosensweig, stated, “The accelerated share repurchase demonstrates the strength of our balance sheet, and it reaffirms our confidence in the long-term opportunity for Chegg, as well as our continued commitment to enhancing shareholder value.”
Management Weighs In
Rosensweig shared his optimism on the Busuu acquisition and said, “The addition of Busuu gives Chegg the unique opportunity to expand our business while also adding tremendous value to our existing users.”
He further added, “It will allow us to drive further into international markets, as well as accelerate Busuu’s growth in the US market. Busuu’s team, who we have known for many years, are a great cultural fit. They have built an incredible learning service for the serious language learner, and we are excited to have them as part of Chegg.”
The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 5 Buys and 8 Holds. The average Chegg price target of $53.20 implies 107% upside potential from current levels.
Bloggers Weigh In
TipRanks data shows that financial blogger opinions are 84% Bullish on CHGG, compared to a sector average of 69%.