NEW YORK (TheStreet) -- Career Education Corporation (CECO) surged 57% Friday to $5.947 after the college-level education services provider announced the sale of its European properties to private equity firm Apax Partners. At the time of the announcement, the deal was worth $305 million, surpassing the company's $255 million market capitalization.
Illinois-based Career Education stands to pocket $276.5 million from the transaction, expected to close by year-end, and plans to reinvest the bulk of those profits into its U.S. operations. The for-profit education provider has been victim to decreasing enrollments in previous quarters with total new student starts falling 25% in the three-month period to June.
"Redeploying capital from Europe to the United States is the right move for Career Education," said CEO Scott W. Steffey in a statement. "It will help us best serve the vast majority of our students, who are U.S.-based, and return the best value for our investors."
The European division generated $128.6 million in revenue for financial year 2012, amounting to 9% of the company's total revenue.
"The cash from the transaction will improve our options for accelerating future growth," added Steffey.
Wells Fargo upgraded the stock to "outperform" from "perform" on news of the transaction, and revised its price target to between $5 and $7.
TheStreet Ratings team rates Career Education Corp as a Sell with a ratings score of D. The team has this to say about their recommendation:
"We rate Career Education Corp (CECO) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself."