• Director warns of liquidy risk if shareholders vote down bid
  • Investors scheduled to vote on deal at meeting on April 28

Alberta Investment Management Corp. has spoken out against the bid for Apollo Education Group Inc., saying the company should be valued at almost three times the $1.1 billion being offered by a group of private-equity firms.

The Canadian pension fund, Apollo’s sixth-largest shareholder, sees fair value in the “high 20-dollar range,” fund manager David Tiley said by phone. That compares with the offer of $9.50 a share on which investors are due to vote on April 28.

“Some shareholders maintain a different tolerance for downside risk to that of the other investors,” Apollo Education director Robert S. Murley said in a statement. “Were the transaction to be voted down, Apollo Education Group could face serious consequences, including a further decline in the share price that could have an impact on the company’s access to liquidity. ”

Apollo Education had more than $2.9 billion erased from its market value in 2015 amid an industry scandal that uncovered examples of high tuition and paltry results among for-profit schools. The company, which is also being scrutinized by U.S. regulators for possible unfair advertising and marketing, has said the challenges have continued into 2016.


Schroders, First Pacific

Aimco’s Tiley joins London-based Schroders Plc and Los Angeles-based First Pacific Advisors LLC in speaking out against the deal on valuation grounds. Together they own more than 26 percent of the Class A shares. Corporate-governance adviser Institutional Shareholder Services Inc. also told investors to reject the offer, saying a standalone company is “more compelling than its risks.”

“They have decided to sell effectively at the bottom,” said Tiley, who helps oversee more than $90 billion of the pension fund’s assets. “We have layered into the position realizing that it’s an industry that is out of favor. Our long-term view is that this space will return to secular growth.”

Both Tiley and Schroders’ Andrew Lyddon have also expressed concern over the board’s decision to spend 96 million euros ($108 million) on the acquisition of an education company in Germany in October, before accepting an offer a few months later from private-equity firms including Apollo Global Management.

Apollo Education Chief Executive Officer Greg Cappelli, who fund managers say stands to earn about $7.3 million in cash and shares from the transaction, has insisted that the board ran a “robust process” over the past 12 months and had looked at strategic alternatives before accepting the offer.

Challenging Environment

His views have been also been backed by investor proxy advisers Glass Lewis & Co. and Egan-Jones Ratings Co., which have both recommended that shareholders accept the offer, citing the challenging operating and regulatory environment.

“Shareholders’ votes should be based not only on the adequacy of what they are receiving, but also the potential risks they avoid by accepting this offer,” Apollo Education’s Murley said.

Apollo Education has climbed about 4.6 percent in New York trading since the deal was announced on Feb. 8 to close at $7.27 last week. That compares with a high of $97.93 in 2004.

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