Apollo Education to Explore Sale to Apollo Global Management

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Apollo Education Group, the Phoenix-based company that owns the University of Phoenix, has revealed the company’s plans to explore a sale and other ‘transforming’ alternatives after reported losses due to a drop in enrollment at the University of Phoenix. On the day of the announcement, the company’s shares soared.

The Wall Street Journal reports that the struggling education organization is already in talks with Apollo Global Management to discuss the possibility of a sale. According to WSJ, the deal could come at around $1 billion, with Apollo Education’s shares estimated at $714 million as of January 8. Following the Wall Street Journal report on the news, the company’s share value increased by 21 percent, Reuters reports.

“Apollo is taking the necessary steps to enhance long-term shareholder value through a series of strategic actions which include transforming University of Phoenix into a higher retaining, more trusted provider of career relevant higher education, continued expansion of our international network, and a commitment to efficiency,” the Apollo CEO, Greg Cappelli said.

Apollo Education Group, which owns several for-profit institutions including the Western International University and the College for Financial Planning, has previously been in touch with several private equity firms, but Apollo Global Management seems to be the only one maintaining its interest to gain control of the company.

According to the Wall Street Journal report, it is projected that the two will reach a sale agreement within the first quarter of 2016. The company reported $586 million in revenue, marking an 18 percent drop compared to $714 million in revenue for 2014. The company lost 56 percent per share with $60.8 million in reported losses, Gazette says.

The Indian Times report that student enrollment at University of Phoenix dropped by 38.1 percent. They say that it is the 18th consecutive quarter that the for-profit educational institution reported a revenue drop.

Increased federal scrutiny of for-profit higher education institutions meant that the University of Phoenix witnessed a sharp and extended fall in student enrollment, especially since federal aid has been substantially reduced, a revenue source the University relied on, Reuters says.

According to an official statement by Apollo Education Group, they will continue having Barclays and Credit Suisse as financial advisors and will continue receiving legal advice from Sullivan & Cromwell.

Apollo Education is not the only for-profit institution under scrutiny in recent years. Federal investigations five years back have set Apollo Education, ITT Educational Services, and DeVry Education Group against tough regulation in view of their poor graduation rates, high student debt, and weak job prospect for graduates, Reuters says. The scrutiny resulted in much stricter funding rules from the U.S. Department of Education.

In the summer of 2015, the Federal Trade Commission requested more information regarding the marketing and advertising strategies implemented at the University of Phoenix, while the U.S. Department of Defense no longer allows the institution to recruit students on military bases.

Apollo Education Group has 18,813 employees, and its educational programs are available in Europe, Australia, Africa, Asia and Latin America.