(Reuters) - Apollo Education Group Inc APOL.O said the U.S. Department of Education’s conditions for the company to remain eligible for the student federal aid program after being acquired by a group of private equity firms could derail the deal.
The DoE has asked the PE group to submit a $385.6 million letter of credit within 10 days of completing the deal and also laid out conditions for Apollo Education's student enrollment and retention, the company said. (bit.ly/2h9oCXJ)
Apollo Education said the company or the PE group, which includes funds of Apollo Global Management LLC (APO.N), could abandon the deal if either of them could not decide before the deal termination date of Feb. 1 that they would be able to meet the DoE’s conditions.
The Title IV federal student aid program accounts for a majority of Apollo Education’s revenue.
The company, after years of declining student enrollments due to tough regulations, in February agreed to be bought for about $1.14 billion by a group of PE firms that also includes and Vistria Group LLC and private investment firm Najafi Cos.
Apollo Education’s shares were down about 3 percent at $9.23 midday on Thursday. The stock has not hit $10, the PE group’s takeover offer, since the deal was announced.
The DoE, which was responding to a pre-acquisition review application filed by Apollo Education’s University of Phoenix, said the line of credit could be increased following further review, the company said.
The conditions also require that the University of Phoenix and Western International University maintain enrollment levels that are no higher than those on the day before the acquisition is completed, Apollo Education said.
The two universities will also have to ensure that retention and graduation rates improve over the course of the first year after the acquisition closes.
The company said the DoE said the two universities will also have to recruit all students based on the same standards it uses to recruit military personnel and veterans.
Reporting by Arunima Banerjee in Bengaluru; Editing by Savio D'Souza