A group including private-equity firm Apollo Global Management LLC boosted its bid for Apollo Education Group Inc. in an effort to salvage the takeover of the University of Phoenix owner amid shareholder resistance.

Apollo Global agreed to pay $10 a share, up 50 cents from the price when the companies announced the deal in February, according to people familiar with the matter. In total, the deal is now worth $1.14 billion, up from just under $1.1 billion, according to one of the people.

Apollo Education delayed a shareholder vote on the deal scheduled for last week after it became clear it might lose it. Big Apollo Education shareholders including Schroders PLC had come out against the deal, saying the price was too low.

The two sides are confident that at the higher price they will win shareholder support, according to one of the people. Apollo Education said before the vote that if shareholders rejected the deal, the company "could face serious consequences," and would review other strategic options including a possible sale of the University of Phoenix—alternatives it previously decided weren't better than the full sale.

Apollo Education and others in the for-profit college industry have been hit hard by years of regulatory scrutiny and precipitous enrollment declines, and the company argues that a sale to the Apollo Global group offers its best hope.

Apollo Education, which, besides the University of Phoenix chain owns a portfolio of international operations, is the biggest player in the fast-shrinking sector.

The Education Department began a crackdown in 2010 into what it alleged were overly aggressive marketing practices and underwhelming graduation rates and job placement. Market valuations of for-profit college operators tumbled. Even after rising on the prospect of a sale at a big premium, Apollo Education stock is down some 90% from its high more than a decade ago.

The company, which isn't related to Apollo Management despite the names, had a market capitalization of more than $14 billion in 2009. At its peak, the company enrolled roughly half a million students, a figure which has fallen sharply.

The shares closed at $7.80 Friday, a significant discount to the deal's price, underscoring investor nervousness that it would get blocked. At the higher price, the buyout—by Apollo Global, Vistria Group and Najafi Cos. -- would represent a premium of 52% over where the company's shares were trading before a possible sale came to light in January.

After being accused of recruiting unqualified students from homeless shelters, University of Phoenix has led the industry in tightening admission standards, even offering prospective students a risk-free trial before they commit to paying tuition.

Executives now hope they will be able to complete the turnaround without the pressure of quarterly earnings reports, gaining flexibility to further tighten admission standards, rein in tuition rates and pursue more international projects.

In October, the Defense Department said it had barred the University of Phoenix system from recruiting on military bases and prevented troops from using federal money for classes. The University of Phoenix was subsequently removed from probationary status, reopening the spigot of military tuition-assistance funds.

 

(END) Dow Jones Newswires

May 01, 2016 21:55 ET (01:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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