Merger of Equals Brings Together Two
Best-in-Class Academic Institutions
Strayer University and Capella University to
Continue Operations as Independent, Accredited Institutions of
Higher Education; Faculty and Academic Support Service Positions at
Both Universities to Be Maintained
Combination Will Create More Affordable Options
for Students; Facilitate Sharing of Best Practices; and Increase
Resources for Successful Academic and Employment Outcomes at Each
University
Strayer Education, Inc. (“Strayer”) (NASDAQ:STRA) and Capella
Education Company (“Capella”) (NASDAQ:CPLA) today announced that
they have agreed to combine in an all-stock merger of equals
transaction, creating a national leader in education innovation.
Strayer will be the remaining corporate entity under which both
universities will operate.
Strayer University and Capella University will continue to
operate as independent and separately accredited institutions,
together serving approximately 80,000 students across all 50
states. Both universities will maintain their separate Boards, be
led by their current Presidents and maintain faculty and academic
support service positions separately at each respective
institution. The combination is expected to achieve corporate level
efficiencies that will enable each university to accelerate
innovations that improve affordability, and enhance academic and
career outcomes for students.
Robert S. Silberman, Executive Chairman of Strayer, said, “We
have been admirers of Capella’s innovation and expertise in online
education for years. We are delighted to have the opportunity to
combine Capella’s capabilities with Strayer’s 125-year heritage of
educating working adults. This transaction will enhance our
collective ability to deliver better academic outcomes, to more
working adults, at more affordable prices.”
Kevin Gilligan, Chairman and Chief Executive Officer of Capella,
who will become Vice Chairman of Strayer, stated, “Strayer and
Capella complement each other in powerful ways and share cultures
that value integrity and innovation. Uniting Strayer University’s
degrees in business, including the Jack Welch Management Institute,
accounting, economics, and information technology with Capella
University’s competency-based flexible degree programs, healthcare
offerings, and robust doctoral portfolio will help us better meet
the educational needs of students in the modern economy. We are
committed to maintaining our standards of excellence across both
universities and our non-degreed businesses.”
Karl McDonnell, Chief Executive Officer of Strayer, said, “This
combination will allow us to accelerate investment in the
educational experience we deliver to students at both universities,
while achieving back office efficiencies captured through the
merger of our corporate functions. Strayer, founded in 1892, and
Capella, founded in 1993, have long been recognized for innovation,
distinguished faculties, sought after accreditation and student
satisfaction and success.”
Combination Delivers Significant Benefits
Increased Scale:
- The ability to leverage best-in-class
processes, support and resources of each respective university will
benefit student success and employment outcomes.
- Lower combined corporate expenses
position each university to extend the affordability of their
offerings and further invest in a world-class student experience
and academic outcomes.
- The universities will be able to share
best practices to improve academic outcomes and improve service,
increasing the attractiveness of each university to students and
employers.
Greater Capabilities:
- While the universities will remain
independent, students and faculty at both institutions will benefit
from Capella University’s competency-based learning infrastructure,
assessment capabilities and track-record of improving student
success as well as Strayer University’s video and simulation
classroom and content capabilities and close relationships with
employers.
- Both institutions will work towards
allowing students to seamlessly transfer credits between the
universities and expect to honor employer discounts from either
institution.
- Strayer University’s extensive
ground-based footprint creates the opportunity for Capella
University to extend its competency-based model into hybrid
learning.
Stronger Financial Platform:
- The broader, more diversified product
offering of the combined company will provide for a more balanced
revenue mix.
- With a strong, debt free balance sheet,
and enhanced cash flow, the combined company will be
well-positioned to accelerate innovation in key products and
services and return capital to shareholders through an expected
annual dividend of $2.00 per share following the close of the
transaction.
- The merger of the corporate
organizations is expected to achieve annual cost savings of
approximately $50 million to be fully phased in within 18 months of
closing. Of this amount, we expect approximately half will be
realized during the 12 months following closing. These cost savings
are expected to be achieved through the consolidation of executive
and corporate functions, certain marketing capabilities and IT
operations.
- The merger is expected to be accretive
to Strayer’s EPS by approximately 20% to 25% by 2019.
Transaction Details
Pursuant to the terms of the merger agreement, Strayer and
Capella will combine in an all-stock merger of equals with Capella
shareholders receiving 0.875 Strayer shares for each Capella share,
which represents a premium of approximately 22% to the closing
price of Capella shares on Friday, October 27, 2017, the last
trading day prior to announcement. Based on the closing prices of
Strayer and Capella common stock on October 27, 2017, the implied
equity value of the combined company is approximately $1.9
billion.
Upon completion of the merger, which is expected to be tax-free
to shareholders of both companies, Strayer shareholders will own
approximately 52% and Capella shareholders will own approximately
48% of the combined company on a fully diluted basis.
The combined company’s corporate headquarters will be located in
Herndon, Virginia, and the company will maintain a significant
presence in Minneapolis, Minnesota, including the headquarters of
Capella University and the combined entity’s IT resources.
The transaction has been unanimously approved by the Boards of
Directors of both companies.
Management and
Governance
Upon closing of the transaction, Robert S. Silberman will be
Executive Chairman, Kevin Gilligan will be Vice Chairman, and Karl
McDonnell will be Chief Executive Officer of the combined entity.
Also upon closing, Strayer Education, Inc. will be renamed
Strategic Education, Inc. Its ticker symbol will remain STRA.
Strayer’s Board will be increased to 12 directors total – with
three to be nominated by Capella.
Approvals and Time to
Close
The transaction is expected to close in the 3rd quarter of 2018,
subject to customary closing conditions, including antitrust
approvals, approvals by the Department of Education, state
regulators and relevant accreditation bodies as well as approval by
both Strayer and Capella shareholders.
Advisors
Perella Weinberg Partners LP is serving as Strayer’s financial
advisor for the transaction, with Kirkland & Ellis LLP serving
as its legal advisor.
Morgan Stanley & Co. LLC is serving as Capella’s financial
advisor for the transaction, with Latham & Watkins LLP serving
as its legal advisor.
Conference Call and Webcast
Details
The companies will hold a joint conference call to discuss this
announcement (as well as their 3rd Quarter financial results) on
Monday, October 30, 2017, at 8:00 a.m. eastern time (ET). To
participate in the live call, investors should dial (866) 547-1509
(domestic) or (920) 663-6208 (international) at 7:50 a.m. (ET),
conference ID# 6889128. The webcast, including the accompanying
presentation, will be available on both the Strayer Education Inc.
website (www.strayereducation.com) and the Capella Education
Company website (www.capellaeducation.com) in the investor
relations section. A replay of the call will be available from
October 30, 2017, through November 27, 2017, at (800)
585-8367 (domestic) or (404) 537-3406 (international),
conference ID# 6889128.
Please note that the above call is in lieu of the previously
scheduled Q3 2017 earnings conference calls for each company.
About Strayer Education,
Inc.
Strayer Education, Inc. (NASDAQ: STRA) is educating a more
competitive and qualified workforce by solving higher education's
most challenging problems. It includes Strayer University, a
regionally accredited institution that delivers affordable degree
programs for working adults, and a Top 25 Princeton Review-ranked
executive MBA program through the Jack Welch Management Institute.
Non-degree web and mobile application development courses are
offered through the New York Code + Design Academy. Strayer also
transforms the workforces of its corporate partners through
customized degree and professional development programs. By
deploying innovative teaching methods and technologies that enhance
student learning outcomes, Strayer makes it possible for working
adults to acquire the skills they need to succeed in today's
rapidly changing economy.
About Capella Education
Company
Capella Education Company (NASDAQ: CPLA) is an educational
services company that provides access to high-quality education
through online postsecondary degree programs and job-ready skills
offerings needed in today’s market. Capella’s portfolio of
companies is dedicated to closing the skills gap by providing the
most direct path between learning and employment.
Forward Looking
Statements
This communication contains certain forward-looking statements
made pursuant to the Private Securities Litigation Reform Act of
1995 (the “Reform Act”). Such
statements may be identified by the use of words such as “expect,”
“estimate,” “assume,” “believe,” “anticipate,” “will,” “forecast,”
“outlook,” “plan,” “project,” or similar words and may include
statements with respect to, among other things, the proposed merger
of a wholly-owned subsidiary of Strayer with and into Capella,
including the expected timing of completion of the merger; the
anticipated benefits of the merger, including estimated synergies;
the combined company’s plans, objectives and expectations; future
financial and operating results; and other statements that are not
historical facts. The statements are based on Strayer’s and
Capella’s current expectations and are subject to a number of
assumptions, uncertainties and risks. In connection with the
safe-harbor provisions of the Reform Act, Strayer and Capella have
identified important factors that could cause Strayer’s or
Capella’s actual results to differ materially from those expressed
in or implied by such statements. The assumptions, uncertainties
and risks include:
- the risk that the merger may not be
completed in a timely manner or at all due to the failure to obtain
the approval of Strayer’s or Capella’s stockholders or the failure
to satisfy other conditions (including obtaining required
regulatory and educational agency approvals) to completion of the
merger;
- the occurrence of any event, change or
other circumstance that could give rise to the termination of the
merger agreement;
- the outcome of any legal proceeding
that may be instituted against Strayer, Capella and others
following the announcement of the merger;
- the amount of the costs, fees, expenses
and charges related to the merger;
- the risk that the benefits of the
merger, including expected synergies, may not be fully realized or
may take longer to realize than expected;
- the risk that the merger may not
advance the combined company’s business strategy and growth
strategy;
- the risk that the combined company may
experience difficulty integrating Strayer’s and Capella’s employees
or operations;
- the potential diversion of Strayer’s
and Capella’s management’s attention resulting from the proposed
merger; and
- other risks and uncertainties
identified in Strayer’s and Capella’s filings with the Securities
and Exchange Commission.
Actual results may differ materially from those projected in the
forward-looking statements. Strayer and Capella undertake no
obligation to update or revise forward-looking statements.
Additional Information and Where to Find It
Investors and security holders are urged to carefully review and
consider each of Strayer’s and Capella’s public filings with the
Securities and Exchange Commission (the “SEC”), including but not
limited to their Annual Reports on Form 10-K, their proxy
statements, their Current Reports on Form 8-K and their Quarterly
Reports on Form 10-Q. The documents filed by Strayer with the SEC
may be obtained free of charge at Strayer’s website at
www.strayereducation.com, in the “Investor Relations” tab at the
top of the page, or at the SEC’s website at www.sec.gov. These
documents may also be obtained free of charge from Strayer by
requesting them in writing to 2303 Dulles Station Boulevard,
Herndon, VA 20171. The documents filed by Capella with the SEC may
be obtained free of charge at Capella’s website at
www.capellaeducation.com, in the “Investor Relations” tab at the
top of the page, or at the SEC’s website at www.sec.gov. These
documents may also be obtained free of charge from Capella by
requesting them in writing to 225 South 6th Street, 9th Floor,
Minneapolis, Minnesota 55402.
In connection with the proposed transaction, Strayer intends to
file a registration statement on Form S-4 with the SEC which will
include a joint proxy statement of Strayer and Capella and a
prospectus of Strayer, and each party will file other documents
regarding the proposed transaction with the SEC. BEFORE MAKING ANY
VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS OF
STRAYER AND CAPELLA ARE URGED TO CAREFULLY READ THE ENTIRE
REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS, WHEN
THEY BECOME AVAILABLE, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO
THESE DOCUMENTS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. A definitive joint proxy statement/prospectus
will be sent to the stockholders of each party seeking the required
shareholder approval. Investors and security holders will be able
to obtain the registration statement and the joint proxy
statement/prospectus free of charge from the SEC’s website or from
Strayer or Capella as described above. The contents of the websites
referenced above are not deemed to be incorporated by reference
into the registration statement or the joint proxy
statement/prospectus.
Certain Information Regarding Participants
Strayer, Capella and their respective directors and executive
officers may be deemed participants in the solicitation of proxies
in connection with the proposed transaction. You can find
information about Strayer’s directors and executive officers in its
definitive proxy statement for the 2017 Annual Meeting of
Stockholders, which was filed with the SEC on March 16, 2017, and
in other documents filed with the SEC by Strayer and its directors
and executive officers. You can find information about Capella’s
directors and executive officers in its definitive proxy statement
for the 2017 Annual Meeting of Stockholders, which was filed with
the SEC on March 23, 2017, and in other documents filed with the
SEC by Capella and its directors and executive officers. Additional
information regarding the interests of these directors and
executive officers in the proposed transaction will be included in
the registration statement, joint proxy statement/prospectus or
other documents filed with the SEC, if any, when they become
available. You may obtain these documents (when they become
available) free of charge at the SEC’s web site at www.sec.gov and
from Strayer or Capella as described above.
No Offer or Solicitations
This document shall not constitute an offer to sell or buy or
the solicitation of an offer to buy or sell any securities, nor
shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171030005364/en/
Strayer Education,
Inc.InvestorsDaniel Jackson,
703-713-1862Executive Vice President and Chief Financial
Officerdaniel.jackson@strayer.eduorMediaSard Verbinnen &
CoDavid Reno / Andy Duberstein / Bryan Locke212-687-8080 /
312-895-4700orCapella Education
CompanyInvestorsSteven Polacek,
612-977-5810Senior Vice President and Chief Financial
OfficerSteve.Polacek@capella.eduorMediaMike Buttry,
612-977-5499Vice President for Public Affairs and
CommunicationsMike.Buttry@capella.edu
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