U.S. Battle With For-Profit Colleges Flares Over Sale of Giant School

The U.S. Department of Education slapped a set of tough conditions on a $1.1 billion private equity bid for the company that owns the University of Phoenix, the nation’s largest school, after years of trying to rein in the for-profit college industry.

The university's owner, Apollo Education Group, won preliminary government approval Wednesday for a group of Wall Street investors including Apollo Global Management LLC (no relation) to buy it. But the conditions of the approval, which the prospective owners must meet for the school to continue receiving federal student aid, are so exacting that they have a legal right to walk away from the agreement, deal documents show. For example, they must stump up a $385.6 million letter of credit and, in a serious obstacle to profitability, are barred from expanding the school's enrollment.