If you thought that online education gets no respect, think again. Laureate Education, Inc. (LAUR-NASDAQ) is being acquired in a management-led buyout along with a private equity consortium for $60.50 per share in cash. The high for the shares over the last year is $55.52 and the stock closed Friday at $54.41.
This is a premium to all prices over the last 5-years, so even though it is a low premium it is going to be tough for shareholders to fight. The board has approved the deal subject to shareholder approval, and the total transaction is valued at $3.8 Billion.
The investor group is led by Douglas L. Becker, Chairman and Chief Executive Officer of Laureate, and consists of a consortium including Kohlberg Kravis Roberts & Co.; Citigroup Private Equity; S.A.C. Capital Management, LLC; SPG Partners; Bregal Investments; Caisse de depot et placement du Quebec; Sterling Capital; Makena Capital; Torreal S.A.; and Southern Cross Capital. Here is the full release.
Other main players in the sector are Apollo Group (APOL-NASDAQ), Corinthian College (COCO-NASDAQ); other education centers both for study and for vocational are ITT Educational (ESI-NYSE), DeVry (DVY-NYSE), Career Education (CECO-NASDAQ). eCollege (ECLG-NASDAQ) is the technology engine behind many of the deemed e-learning institutions. There are of course others, but these are the main ones in overlapping sectors that could see some secondary and tertiary bidding on Monday morning. Based on the discounting to year highs and to valuations, Apollo (APOL) should theoretically get the largest boost in pre-market trading and Corinthian (COCO) should be behind it. That’s logical, but never forget that logic isn’t what always runs trading decisions.
Late last month, Corinthian Colleges, a publicly traded for-profit higher education company that enrolls 72,000 students at over 100 campuses nationwide, announced its imminent bankruptcy.
Facing declining enrollment and multiple investigations into its financial and educational practices from parties including the federal Consumer Financial Protection Bureau and a group of state attorneys general, Corinthian was also under pressure from Department of Education regulators demanding information about practices that, the department said, included “falsifying job placement data used in marketing claims to prospective students and allegations of altered grades and attendance.” The department announced that it was temporarily withholding some of the federal student aid money that makes up the vast majority of Corinthian’s $1.6 billion in annual revenues. The company said the CASH delay would render it effectively insolvent.
Last week, Corinthian and the Education Department agreed to negotiate a settlement that will amount to an orderly dissolution of the company.
Some campuses will remain open long enough to finish teaching classes, and others are being readied for sale. In terms of the number of students and amount of MONEY involved, it’s one of the largest higher education collapses in American history.
Given Corinthian’s track record, its students may very well be better off as a result.
The Obama administration has taken an aggressive stance toward for-profit colleges, proposing a set of regulations that would deny federal aid dollars to for-profit programs whose graduates don’t make enough MONEY to pay back their student loans. The industry sued to block the regulations, which remain tied up in lengthy judicial and federal rule-making procedures. But that didn’t prevent the administration from calculating which programs would have failed under the new regulations.