The Higher Learning Commission, a college accreditation agency, has cleared the way for the $1.1 billion sale of Apollo Education Group, owner of the University of Phoenix, Western International University and College for Financial Planning, to a group of investors.
The commission notified Apollo on Monday that it voted in favor of an application filed by the for-profit colleges to ensure they remain accredited after investors assume control of the parent company, according to a regulatory filing. All three institutions must submit quarterly reports to the commission detailing such things as enrollment, quarterly financials and student retention rates.
“With the receipt of this approval, we have obtained all educational regulatory approvals required,” Apollo said in the regulatory filing. The company anticipates completing the deal in February, subject to satisfying all other closing conditions.
The purchase of one of the largest for-profit education companies has been met with criticism because of the involvement of Vistria Group, a private equity firm run by former president Barack Obama’s friend Marty Nesbitt and former deputy education secretary Tony Miller. Vistria is among a consortium of investors bidding to take the publicly traded Apollo private, but its ties to the Obama administration sparked controversy over the Education Department’s objectivity in approving the deal.
The Obama administration made holding for-profit colleges accountable for poor student outcomes and abusive practices a cornerstone of its higher education policy. Phoenix, like other for-profit schools, has been battered by government investigations, heightened federal regulation and poor enrollment.
In December, the Education Department sent the presidents of Phoenix and Western a litany of conditions that must be met by the new owners for the schools to remain in the federal student aid program. Chief among them is a request that investors provide a letter of credit from a bank assuring the availability of as much as $385 million, roughly 25 percent of the federal loans and grants the schools receive. The letter is meant to protect students and taxpayers if the school is unable to cover federal student-aid liabilities.
Education officials also said the schools will not be allowed to add any new programs, must cap enrollment levels, submit projected cash flow statements, produce monthly student rosters, alert the department to any investigations and commit to a recruitment standard, among other things. Many of the requests would essentially place the same demands on the soon-to-be private company as a publicly traded outfit.
In a statement, the Higher Learning Commission said its board approved the application with the conditions imposed by the Education Department in mind. The commission is also requiring each school to host a peer review visit within six months of the transaction closing.
Almost a year has passed since Apollo first announced that a group of investors, including funds affiliated with Apollo Group Management and Najafi Cos., were offering $9.50 a share in cash for the outstanding shares of the company. The group upped the acquisition price to $10 per share in May, which represents a 52 percent premium over Apollo’s closing price on Jan. 8, 2016, when the board of directors said it was considering its options.
The deal has been blessed by Apollo’s board and shareholders. Once the transaction is completed, Miller, chief operating officer of Vistria, will become chairman of the Apollo board. He served as deputy secretary at the Department of Education from 2009 to 2013.
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