Vistria Group with backing from Apollo Global Management (APO) raised its offer for the $1.1 billion buyout of Apollo Education Group (APOL) Monday after failing to get approval from Apollo Education shareholders.
The new $10 per share offer is only a modest bump from the $9.50 offered Feb. 7 and would raise the value of the bid to $1.14 billion.
The acquisition of the private education company with degree and non-degree programs both online and in classrooms, including the University of Phoenix offered a premium of about 30% at the time. Apollo Education shares had suffered a steep decline in recent years as the "proprietary education" industry has come under scrutiny by Federal government agencies, which have set standards for student debt to earnings and require that such education providers receive no more that 90% of revenues from government funded lending.
Major shareholders of Apollo Education think the shares have been beaten up too much and that the buyout undervalued the company.
U.K. investor Schroders Plc, which holds 13.8% of Apollo Education has opposed the deal. First Pacific Advisor LLC, with 9.4%, has said it would not vote for a deal valued at $1 billion. Alberta Investment Management Corp., with 3.1%, is opposed and thinks Apollo Education is worth more than $20 per share. Together these three shareholders represent about 26.3% of the vote.
The vote required a simple majority of the outstanding class A shares. 58% of shares voted were in favor of the transaction but that fell short of a majority of the outstanding shares. A new vote has been set for May 6. Apollo Education said that less than 80% of the class A shareholder voted on April 28, the meeting date.
The class B shares of Apollo Education are held by insiders and had an exclusive vote to adjourn a shareholder meeting.
Apollo Education said it "believes that the increased offer clearly makes this transaction an excellent outcome for shareholders, particularly given the headwinds facing the company," according to Greg Cappelli, Chief Executive Officer. "We appreciate the support of the many shareholders who have voted in favor of the merger agreement and are confident that others will recognize the value that this revised offer represents."
Proxy advisers Glass Lewis and Egan-Jones had recommended shareholder vote in favor of the buyout given the difficult operating environment for the company. Institutional Shareholder Services had recommended Apollo Education shareholders vote against the deal.
Last week, in a proxy filing with the Securities and Exchange Commission, Apollo Education said that if the deal is voted down, the company see could a further decline in share price that could hamper access to liquidity. So, if the transaction is not completed, the board intends to review other strategic alternatives, including a sale of the University of Phoenix. Apollo said it previously considered such an alternative and passed but it might be better than the status quo. The board said proceeds from a sale of the Phoenix asset may be limited.
Apollo shares traded Monday at a spread of $1.47, or 17%, to their value in the revised deal.