Apol 33% appreciation from $7.50 due to merger with Apollo Management

Accuracy score :
97%

Apollo Education Group Inc

 

Apollo Education Group, Inc. is one of the world’s largest private education providers, serving students since 1973. The company offers undergraduate, graduate, certificate and nondegree educational programs and services, online and on-campus, principally to working learners in the U.S. and abroad through the following:

  1. University of Phoenix
  2. Apollo Global (BPP Holdings Limited, Open Colleges Australia Pty Ltd, Universidad Latinoamericana, Milpark Education (Pty) Ltd., Faculdade da Educacional da Lapa, Apollo Global Chile S.A., India Education Services Private Ltd) and
  3. Other (TIY Academy, LLC (“The Iron Yard”), the College for Financial Planning Institutes Corporation, Western International University, Inc. Apollo Professional Development).

 

Acquisitions

 

On February 7, 2016, the company entered into an Agreement and Plan of Merger with AP VIII Queso Holdings, L.P., an affiliate of Apollo Management VIII, L.P., which is a fund managed by an affiliate of Apollo Global Management, LLC, none of which is, or has ever been, affiliated with Apollo. At the effective time of the merger, which is expected to be completed by the end of calendar year 2016, each share of Apollo issued and outstanding Class A and Class B common stock will be converted pursuant to the terms of the Merger Agreement into the right to receive $10.00 per share in cash. On May 6, 2016, the Merger Agreement was approved by the Apollo’s holders.

In addition, consummation of the merger is subject to our satisfying certain minimum operating metrics. If Apollo fails to satisfy one or more of closing conditions, Parent would be entitled to terminate the Merger Agreement and elect not to consummate the merger.

On June 11, 2015, the company acquired a 62% interest in TIY Academy, LLC (“The Iron Yard”), a provider of nondegree information technology bootcamp programs in the United States, for $15.9 million.

 

During fiscal year 2015, the company purchased the remaining 30% noncontrolling ownership interests in Open Colleges for $51.5 million. On December 20, 2013, the company acquired 70% of the outstanding shares of Open Colleges, a provider of education and training to adult learners in Australia. The company paid A$110.3 million (equivalent to $98.1 million on the transaction date), plus contingent consideration, which initially measured at $21.4 million based on information available as of the acquisition date.

 

On December 4, 2014, the company acquired a 75% interest in Sociedade Técnica Educacional da Lapa S.A., a provider of postsecondary educational programs in Brazil under the name Faculdade da Educacional da Lapa (“FAEL”). The company made an initial cash payment of R$73.8 million (equivalent to $28.9 million on the acquisition date), and the acquisition includes a potential contingent consideration payment in the future that is principally based on FAEL’s calendar year 2018 net revenue.

 

On May 20, 2014, the company acquired an 81% consolidated interest in Milpark Education, a provider of education and training to adult learners in South Africa, for approximately ZAR 265 million (approximated $26 million on the transaction date). In connection with the acquisition, the company also has the option to buy the remaining noncontrolling interests, and the noncontrolling shareholders have the option to sell their shares to the company.

 

During fiscal year 2013, the company purchased the remaining 14.4% noncontrolling ownership interest in Apollo Global for $42.5 million cash, plus a contingent payment based on a portion of Apollo Global’s operating results through the fiscal years ending August 31, 2017.

 

On September 12, 2011, the company acquired all of the outstanding stock of Carnegie Learning, a publisher of research-based math curricula and adaptive learning software for a cash purchase price of $75.0 million. In a separate transaction completed on September 12, 2011, the company acquired related technology from Carnegie Mellon University for $21.5 million payable over a 10-year period.

 

 

Summary (from latest annual report 2015)

 Year ended August 31

  • Market Capital: $822,379,076 (last share price is $7.56 as of Sep 22. There were 108,305,152 shares of Apollo’s Class A common stock outstanding and 475,149 shares of Apollo’s Class B common stock outstanding as of July 5, 2016).
  • Total stockholders’ equity: $1,145,000,000 down by $35,000,000 or -3% from $1,180,000,000 in 2014 primarily due to foreign currency translation losses from assets and liabilities of the foreign subsidiaries ($45,868,000,000) as a result of the general strengthening of the U.S. dollar relative to other currencies.
  • Current liabilities: $832,000,000 or 38% out of total liabilities and equity is down by $711,000,000 or -46% from $1,543,000,000 in 2014 primarily because the company paid back unsecured revolving credit facility $585,000,000.
  • Non-current liabilities: $228,000,000 or 10% out of total liabilities and equity is down by $141,000,000 or -38% from $369,000,000 in 2014.
  • Net sales: $2,566,000,000 down by $458,000,000 or -15% from $3,024,000,000 in 2014 due to lower enrollment due to significant and increasing competition from public and private colleges and universities as these institutions continue to increase their online education programs. Also decrease was as a result of the increased use of discounts, grants and scholarships.
  • Net income: $30,000,000 down by $179,000,000 or -86% from $209,000,000 in 2014 primarily due to higher percentage of cost of revenue (instructional and student advisory costs) from 43% in 2014 to 47% in 2015 ($109,168,000 exaggeration).
  • Cash and cash equivalents: $504,000,000 down by $725,000,000 or -59% from $1,229,000,000 in 2014.
  • $169,000,000 provided by operating activities: decreased by $207,000,000 or -55% compared to fiscal 2014 (2014: $376,000,000) primarily due to decrease of net income by $179,000,000.
  • -$154,000,000 used in investing activities: decreased by $196,000,000 or 56% compared to fiscal 2014 (2014: -$350,000,000) primarily due to lower purchases of marketable securities by $86,379,000 and lower acquisitions payments by $87,749,000.
  • -$725,000,000 used in financing activities: increased by $514,000,000 or 244% compared to fiscal 2014 (2014: -$211,000,000) primarily due to lower proceeds from borrowings by $585,331,000 ($5,800,000 in 2015 vs. $591,131,000)

 

Apollo Education Group Inc subsidiaries

Entity,   Jurisdiction of Incorporation or Formation

  1. Apollo Development Corp.Arizona
  2. Apollo Global, Inc.Delaware
  3. Apollo Group China, LLCArizona
  4. Apollo Investments, Inc.Arizona
  5. Apollo NB Holding CompanyArizona
  6. Aptimus, Inc.Washington
  7. The College for Financial Planning Institutes CorporationArizona
  8. The University of Phoenix, Inc.Arizona
  9. Apollo Education Services, LLCDelaware
  10. Carnegie Learning, Inc.Pennsylvania$75.0 million      (100%)
  11. Apollo Lightspeed LLCDelaware
  12. Apollo Education Ventures, LLCDelaware
  13. TIY Academy, LLCSouth Carolina$15.9 million      (62%)
  14. College for Financial Planning, Inc.Arizona
  15. Sociedade Técnica Educacional da Lapa S.A$28.9 million(75%)
  16. Milpark Education$26 million         (81%)
  17. Open Colleges$149.6   million (100%)

 

*Amounts based on purchased price

 

Opinion about the company

Due to significant and increasing competition from public and private colleges and universities as these institutions continue to increase their online education programs, Apollo Education Group incurs decline of sales, which resulted in significant decrease of profit by 7 times last year from $209,000,000 in 2014 to $30,000,000 in 2015. It affected all profitability ratios, which went down dramatically (return on assets 6.87% in 2014, but 1.12% in 2015) and made the company not attractive for investors.