Univ. of Phoenix investors OK $1.14 billion buyout

PHOENIX — After nearly 22 years as a publicly traded company, shareholders of the parent to the University of Phoenix approved a $1.14 billion sale Friday that hands the for-profit school over to a trio of private investors.

Investors representing 54% of shares accepted the sale of the Apollo Education Group. The approval came after the company extended the period to vote on the buyout by eight days and the new owners increased their offer to $10 per share, 50 cents higher than the original deal.

The sale to Apollo Global Management of New York, the Vistria Group of Chicago and Najafi Companies of Phoenix is still subject to regulatory scrutiny that could take months more.

“We appreciate the support from our shareholders in approving this transaction,” said Greg Cappelli, CEO of Apollo Education. “This has been a robust process in which our board of directors reviewed many strategic alternatives and found this transaction to be in the best interest of all stakeholders. We believe this new ownership structure will allow Apollo Education Group to continue to transform University of Phoenix, further expand our global operations, drive operational efficiency and serve as the leading provider of high-quality education for working adults.”

University of Phoenix to be sold amid shrinking enrollment

The buyout, however, likely ends a key chapter in the corporate life of the University of Phoenix.

From an upstart pioneer of adult education and distance learning to a high-flying stock, Apollo Education ends its era as a publicly traded company under a cloud of government investigations and as a symbol of the now-shrunken for-profit education industry. That industry has drawn criticism for coursework that too often leaves students and taxpayers saddled with debt and middling career options for graduates.

Apollo Education’s $10 per share sale price was 12% over the stock's closing value of $8.95 Friday and 52% higher than the stock price in January, when the company first made public it was for sale. The company's stock will remain active until the deal closes and was rising in early after-hours trading.

In taking the deal, shareholders cut their losses with a company that had seen its stock wither from $89 in 2009 to $6.31 earlier this year.

While public investors walk away, the new private owners inherit thousands of anxious employees who have seen jobs hacked for years as the flagship university hemorrhaged students. The new owners didn't outline their immediate plans or rule out more layoffs.

In earlier remarks, company officials said private ownership would allow them the time needed to reverse their losses without facing the pressure to file quarterly reports that please investors.

Tony Miller, a partner at the Vistria Group, will become chairman of Apollo Education when the deal closes. He would effectively replace Peter Sperling, the current chairman of Apollo Education and the son of the company's founder, John Sperling.

Miller, a former deputy secretary of the U.S. Department of Education under President Obama, acknowledged the for-profit industry’s struggles in a statement announcing the deal in February.

“For too long and too often, the private education industry has been characterized by inadequate student outcomes, overly aggressive marketing practices, and poor compliance. This doesn’t need to be the case,” he said at the time.

The sale comes 21 months after the death of the university's maverick founder, John Sperling, and amid a general pullback in for-profit education due to growing competition from traditional universities and intense government scrutiny.

Cappelli, the current CEO, and other top executives with the company stand to divide about $22.3 million from the sale. Of that, Cappelli could collect $4.2 million in cash and $3.3 million in stock.

As the company laid out its limited options and the "golden parachutes" awaiting the executives, Apollo Education also notified investors of a false-claims lawsuit filed against it in Ohio. The company also faces an ongoing investigation by the Federal Trade Commission and California's attorney general relating to alleged wrongdoing in marketing to members of the military.

Perhaps equally worrisome, Apollo Education was facing an expiring credit line, a recent $70 million loss in business value and a worsening score the U.S. Department of Education uses to permit access to taxpayer-backed student loans, which account for the bulk of company revenues.

The records show that while Apollo Education has cash stockpiles, much of it could be obligated to manage its operations in the future.

The company has cut its enrollment forecast to 130,000, well below the record 470,000 students six years ago.

When Apollo Education joined the Nasdaq Stock Market in December 1994 it had 28,000 students.