Sylvan Learning Systems, which owns the private Universidad Europea de Madrid, has launched a $500 million (Pounds 317 million) subsidiary that will specialise in internet-based programmes.
The company is putting $300 million into the venture. Private investment firm Apollo Management is committing $100 million, with more money coming from Rare Medium, a company that helps others to develop e-commerce strategies. The partnership expects to raise another $100 million from strategic internet investors in the near future.
"We believe that the internet incubator represents a unique way for Sylvan shareholders to participate in the burgeoning internet marketplace and to share in the potential for tremendous wealth creation," said Christopher Hoehn Saric, chairman and chief executive of the Sylvan incubator, and co-chief executive of Sylvan.
Last week Sylvan announced a company restructuring aimed to "allow Sylvan to become the true clicks-and-mortar leader in the education industry", said its president, Douglas Becker.
The Universidad Europea de Madrid will join the main operating business with other subsidiaries, including the Caliber Learning Network, which provides corporate education programmes.
Sylvan recently reported disappointing financial results. For the fourth quarter of 1999, it made a net loss of $20 million from continuing operations, though revenue was up by 15 per cent to just under $100 million.
The company is now finalising the sale of its computer-based testing division, Prometric, to Thomson Learning for $775 million. Mr Becker said: "We feel strongly that the fourth-quarter results are not representative of the future results of our core education services businesses."
Universidad Europea de Madrid generated $16.1 million for the fourth quarter of 1999. Sylvan has a 54 per cent stake in the university. The remaining shares are held by Julio Fidalgo, former president of the university, who is in dispute with Sylvan after its acquisition of the business against his wishes.