The company, which runs the University of Phoenix and several other for-profit education programs, announced this morning that it will sell itself to a group of investors for $1.1 billion. While this $9.50/share is only about a third of what the stock was valued at a year ago, Apollo’s situation has become so dire that it’s a 44% premium above what the company has been trading for.
In a statement, Apollo’s current and future leadership explain that they hope that taking the company private will allow it to make improvements without the pressure to placate shareholders.
Current Apollo Education CEO Greg Cappelli says “This new structure will allow Apollo Education Group the flexibility and runway it needs to complete the transformational plan at University of Phoenix, which will enable us to serve our students more effectively during a period of unprecedented volatility within our industry.”
Tony Miller of The Vistria Group is slated to take over as chairman of Apollo’s board when the deal is complete. He is a former Deputy Secretary of the U.S. Department of Education, and his spin on the transaction acknowledges the dark cloud that hangs over the for-profit college industry.
“For too long and too often, the private education industry has been characterized by inadequate student outcomes, overly aggressive marketing practices, and poor compliance,” says Miller. “This doesn’t need to be the case.”
At its pre-recession height, Apollo’s stock traded at ten times today’s announced sale price. In the wake of the subsequent housing market and banking collapse, federal regulators and lawmakers began scrutinizing for-profit educators, which received a disproportionate level of federal student financial aid. Schools like Phoenix charged high tuitions but were criticized for offering classes and programs that could be taken more affordably through city and community colleges. Additionally, student at for-profit schools had significantly higher dropout and loan default rates.
In recent years, both federal and state regulators have questioned the marketing practices of many for-profit educators. A number of chains have been investigated for using inflated job-placement statistics to mislead applicants into believing that they could find gainful employment after graduation. Apollo itself was briefly suspended from receiving Department of Defense tuition assistance funds because of its questionable recruiting practices for servicemembers.
At its height in 2010, Apollo had more than 470,000 students enrolled. By spring 2015, that had fallen to around 214,000.
Last October, Apollo chairman Peter Sperling sold off around $10 million in company stock in just a few days. In early January, it was reported that Apollo was considering the idea of a sale.
by Chris Morran via Consumerist
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