8-K: Perdoceo Education Corp to Acquire University of St. Augustine for Health Sciences in $142-$144 Million Deal

Perdoceo Education Corporation has entered into a definitive agreement to acquire the University of St. Augustine for Health Sciences for approximately $142 to $144 million in cash.

Summary

• Perdoceo Education Corporation has agreed to acquire 100% ownership of the University of St. Augustine for Health Sciences (USAHS).
• The purchase price is expected to be between $142 million and $144 million in cash, subject to adjustments for cash, debt, and working capital.
• The transaction is expected to close in December 2024, pending regulatory approvals and other customary closing conditions.
• USAHS is a leading university offering graduate health sciences degrees, with approximately $170 million in revenue and $35 million in operating income for the year ended December 31, 2023.
• USAHS has approximately 4,500 graduate and post-graduate students.
• Perdoceo has purchased a buyer-side representation and warranty insurance policy to cover certain risks associated with the acquisition.
• The acquisition is expected to be accretive to Perdoceo's adjusted operating income starting in 2025 and provide further growth in 2026.
• Perdoceo plans to fund the acquisition using available cash balances.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the strategic acquisition, expected financial benefits, and reaffirmation of the company's outlook. The language used is optimistic and forward-looking, indicating confidence in the transaction's success.

Positives

• The acquisition is expected to be accretive to Perdoceo's adjusted operating income starting in 2025.
• The acquisition will diversify Perdoceo's academic program offerings into health sciences.
• USAHS is a well-established university with a strong financial performance.
• The transaction is fully funded by Perdoceo's available cash balances.
• The buyer-side representation and warranty insurance policy provides protection against certain risks.

Negatives

• The actual cash paid is subject to adjustments for cash, debt, and working capital, which could impact the final purchase price.
• The transaction is subject to regulatory approvals and other closing conditions, which could delay or prevent the acquisition.
• Perdoceo will be required to pay a termination fee of $4 million, $10 million or $20 million under certain circumstances if the deal does not close.

Risks

• The acquisition is subject to regulatory clearances, including antitrust clearance and approval from WASC and the US Department of Education.
• The transaction may be delayed or not occur at all if closing conditions are not met.
• Perdoceo may not achieve the anticipated benefits of the transaction.
• The acquired business may not perform as expected.
• Perdoceo may assume unexpected risks, liabilities, and obligations of the acquired business.
• Significant transaction costs may be incurred.
• Disruptions from the transaction may harm the parties' businesses.
• There is a risk of not being able to retain and hire key personnel.
• Potential adverse reactions or changes to business relationships may result from the announcement or completion of the transaction.

Future Outlook

Perdoceo expects the transaction to be accretive to the Companys adjusted operating income immediately beginning in 2025 and the transaction to provide further growth in adjusted operating income in 2026. Perdoceo remains on track to achieve its full year adjusted operating income outlook for $175 million to $190 million for 2024.

Management Comments

• Todd Nelson, President and CEO of Perdoceo, stated he was impressed with the USAHS team and looks forward to having them join the organization.
• Todd Nelson believes Perdoceo's resources will support transformational initiatives at USAHS, enhancing student experiences and delivering sustainable growth.

Industry Context

The acquisition aligns with the growing demand for health science degrees, as jobs in the health sciences are expected to increase 13% by 2031, more than twice the average job growth rate across all employment sectors. This acquisition marks Perdoceo's entry into health science degrees.

Comparison to Industry Standards

• The document does not provide specific details on comparable companies or projects.
• However, the document does mention that USAHS is one of the nation's leading universities offering graduate health sciences degrees, suggesting a high standard within its sector.
• The financial metrics of USAHS, with $170 million in revenue and $35 million in operating income, indicate a strong performance compared to other institutions in the higher education sector.

Stakeholder Impact

• Shareholders: The acquisition is expected to be accretive to adjusted operating income, potentially increasing shareholder value.
• Employees: The ownership transition is not expected to impact the current academic programs of USAHS, and USAHS will remain fully committed to serving and educating students and providing the same high quality educational experience.
• Students: The acquisition is not expected to impact the current academic programs of USAHS, and USAHS will remain fully committed to serving and educating students and providing the same high quality educational experience.
• Customers: The acquisition is not expected to impact the current academic programs of USAHS, and USAHS will remain fully committed to serving and educating students and providing the same high quality educational experience.

Next Steps

• Obtain regulatory clearances, including antitrust clearance and approval from WASC.
• Receive a preacquisition review response from the US Department of Education.
• Complete the acquisition, expected in December 2024.
• Integrate USAHS into Perdoceo's operations.
• Focus on enhancing student experiences and delivering sustainable growth at USAHS.

Key Dates

Keywords

acquisition, higher education, health sciences, graduate programs, Perdoceo Education Corporation, University of St. Augustine for Health Sciences, merger, regulatory approvals, accretive, operating income