Apollo Education Group Expands in Brazil with FAEL Buy

Apollo Education Group, Inc. (APOL) recently closed the acquisition of Faculdade da Educacional da Lapa (:FAEL) for $28.9 million (at current exchange rates). On Dec 5, Apollo Education Group’s wholly-owned subsidiary Apollo Global, Inc. acquired 75% of FAEL, a provider of distance learning post secondary education.

Based in Curitiba, Paraná, Brazil, FAEL offers undergraduate and graduate programs to about 12,000 students. The programs are offered online and through one campus and 113 accredited undergraduate learning centers across all states in Brazil. The institution is well known for its programs in business, education and technology.

For Apollo Education Group, this is an opportunity to increase its share of the educational market in Brazil. With a growing GDP, the country is growing at a fast pace and soon there will be a huge demand for skilled labor. Meanwhile, following its integration, FAEL will benefit from the academic expertise of Apollo Global and its best practices as a larger education company and thus will be able to capitalize on the opportunities that follow the acquisition.

There is a large gap between the skills required by the industry and those of college students. With an increasing middle class population, there will be a growing demand for career-oriented programs. Private educational institutes like Apollo Education Group can play a role in bridging this gap by providing career-oriented educational programs.

Apollo Education Group has been undertaking aggressive international expansion through Apollo Global. It has already acquired educational institutions in the United Kingdom, Mexico, Chile, Australia and South Africa and established a joint venture in India. Currently, Apollo Global has institutions across six continents.

All of the international colleges of Apollo Global have shown significant progress in 2014. Management is confident that its cash flow will be positive by end of fiscal 2015. In fact, BPP Holdings, which accounts for a little more than half of Apollo Global’s revenues, returned to profitability in fiscal 2014 with revenue growth in high single digits.

Management expects Apollo Global to become a much bigger part of its portfolio in the next five years. Apollo Global has a 2015 revenue run rate of $400 million and management is targeting over $1 billion within the next five years.

Apollo Education Group carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Better ranked stocks in the education industry worth considering include Strayer Education Inc. (STRA), Grand Canyon Education, Inc. (LOPE) and Capella Education Co. (CPLA). All the three education companies sport a Zacks Rank #1 (Strong Buy).

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