Apollo Education (APOL) Takeover Remains on Track to Close Despite Growing Concerns - Source

October 31, 2016 12:40 PM EDT

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The pending takeover of Apollo Education Group (NASDAQ: APOL) remains on track to close shortly despite growing concerns the deal could hit a roadblock, according to a market source. This news comes amid talk in the market that an all-important U.S. Department of Education pre-acquisition review is forthcoming and could include conditions that could potentially jeopardize the deal. In addition, operating metrics have been trending lower - another concern for deal watchers.

In May 2016, Apollo Education shareholders agreed to be acquired by a consortium of investors including The Vistria Group, LLC, funds affiliated with Apollo Global Management, LLC and the Najafi Companies for $10.00 per share in cash.

The U.S. Department of Education is currently reviewing the pre-acquisition application that was submitted within the 45-day time limit before the change occurs, according to a Education Department spokesman. The Department would not comment on when the review would be complete.

The deal also requires Higher Learning Commission (HLC) approval. However, HLC approval is pending the Department of Education pre-acquisition review.

With its fiscal year 2016 results reports on October 20th, Apollo Education noted that revenue fell to $2.1 billion from $2.6 billion in fiscal year 2015. In addition, University of Phoenix Average Degreed Enrollment was 165,600 in the fiscal year 2016, compared to 214,500 for the prior year period. Loss from continuing operations attributable to Apollo Education Group for fiscal year 2016 was $74.9 million, or $0.69 per share, compared to income of $52.9 million, or $0.49 per share, for fiscal year 2015.

Despite the drop in all operating metrics, the company said it satisfied each of its minimum operating metrics as of September 30, 2016, which is the relevant measurement date for a closing on or prior to November 9, 2016. In addition they currently expect to satisfy these metrics if the closing occurs on or prior to February 1, 2017, which is the date on which the contract becomes terminable by either party if the closing conditions have not been met.

Overall, despite growing fears that the deal will be abandoned all looks on pace to close soon.

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