Apollo Global Buys Open Colleges

Zacks

Apollo Global, Inc., the wholly-owned subsidiary of Apollo Education Group, Inc. (APOL) has agreed to acquire 70% of the outstanding stock of Open Colleges Australia Pty Ltd, known as Open Colleges.  Open Colleges is one of Australia's oldest and largest providers of distance learning and the acquisition is in line with APOL’s long term strategy of global expansion. The acquisition is expected to be completed by the second quarter of 2014.

According to the agreement, Apollo Global will purchase 70% of the outstanding stock of Open Colleges in cash for about $98.5 million, along with a contingent payment of about $47 million which will be based on 2014 operating results. The agreement allows Apollo Global to purchase the rest of the 30% stock in the future.

Though Apollo Group has a dominant market position and focuses on offering relevant career oriented educational programs, the company had been witnessing weak enrollment in the U.S., which resulted in a decline in revenue. The acquisition will thus allow Apollo Global to access the growing education market in Australia. The acquisition will allow the company to focus its resources in the international education market, where better results are expected.

Apollo carries a Zacks Rank #3 (Hold). Better-placed stocks in the education sector include ITT Educational Services Inc. (ESI), New Oriental Education & Technology Group Inc. (EDU) and Xueda Education Group (XUE). Both ITT Educational Services and New Oriental Education & Technology Group carry a Zacks Rank #1 (Strong Buy), whereas Xueda Education Group carries a  Zacks Rank #2 (Buy).

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