Investor consortium completes $1.1bn purchase of Apollo Education
For-profit education provider Apollo Education Group has been purchased for $1.14bn by a private equity consortium led by Apollo Global Management (which is unrelated to the education group) and also made up of Vistria Group and Najafi Companies. The $10-a-share purchase had been delayed by an an extensive review by the Department of Education. The company, which owns the University of Phoenix and BPP Law School, generated a net revenue of $2.1bn in 2016 and was valued at $9.50 a share in February 2016 when the buyers announced their interest. Apollo Global Management also owns McGraw-Hill Education.

The acquisition of the for-profit provider is led by private equity giant and McGraw-Hill Education owner Apollo Global Management (no relation to Apollo Education Group), with The Vistria Group and Najafi Companies completing the consortium.

The $10-per-share deal was approved by Apollo Education Group’s shareholders on May 6, 2016.

“This transaction will allow us to accelerate our efforts to improve outcomes for all of our students”

This is despite some resistance by its top two shareholders, who argued they would lose out on future profits.

UK asset manager Schroders, which owned more than 13% of Apollo Education, wrote to its chairman urging the board “to reject any proposals that would deny shareholders the opportunity of benefiting from this significant recovery potential,” Bloomberg reported.

“We see the potential for multiple hundreds of percent of upside in Apollo [Education]’s stock from current levels over a period of years,” Schroders’s global value team wrote.

First Pacific Advisors LLC, the company’s second-biggest investor, also objected, claiming Apollo Education is worth about $29 a share and telling its clients a $1bn deal “would be unquestionably rejected by us, and we hope every other shareholder would reject it”.

The total value of the deal, though huge, is nevertheless worth just half of the $2.1bn the company generated in net revenue in FY16.

The acquisition was expected to be completed by the end of the company’s fiscal year in August 2016, but was delayed by a lengthy review by the Department of Education.

The for-profit education sector in the US is undergoing extreme scrutiny at the moment, and the University of Phoenix, one of the country’s largest for-profit providers, has faced controversy of its own. It was investigated by the Federal Trade Commission in 2015 to determine whether its recruiters had engaged in “deceptive or unfair acts or practices” in advertising its programmes and their future job prospects.

Announcing the proposed deal in February 2016 – then valued at $9.50 a share – the buyers hinted they intended to work to rehabilitate the for-profit sector.

“For too long and too often, the private education industry has been characterised by inadequate student outcomes, overly aggressive marketing practices, and poor compliance. This doesn’t need to be the case,” commented Tony Miller, COO and partner at The Vistria Group and former deputy education secretary at the US Department of Education.

Miller has now been named chairman of Apollo Education Group’s board of directors, indicating the consortium will forge ahead with this plan.

“Too often, the private education industry has been characterised by inadequate student outcomes and poor compliance”

“We believe we are uniquely positioned to enhance efforts by University of Phoenix and the other Apollo Education Group schools to improve student outcomes,” he said.

Apollo Education Group’s CEO, Greg Cappelli, confirmed that the buyout would enable the company to complete a “transformation plan” at the University of Phoenix.

“This transaction marks a significant milestone in our company’s history, and will allow us to accelerate our efforts at [our subsidiaries] University of Phoenix, Western International University, College for Financial Planning and Apollo Global to improve outcomes for all of our students in the US and around the world,” he commented.

Apollo Education Group operates education brands including Bridge School of Management in India, Brazilian post-secondary education provider FAEL, and UK-based BPP Holdings, through an 80% ownership of Apollo Global (no relation to the management group) a joint venture with The Carlyle Group which owns 20%.

Apollo Global acquired BPP for £303.5m in 2009, four years before it was granted university status.

The same day Apollo Education Group went private, another for-profit giant, Laureate Education Group, issued its second IPO in a bid to raise $490m.