Apollo Global Management Bumps Price for Apollo Education Takeover
May 01 2016 - 10:10PM
Dow Jones News
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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