Market Overview

Strayer Education, Inc. and Capella Education Company Combine to Create a National Leader in Education Innovation


Merger of Equals Brings Together Two Best-in-Class Academic

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

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

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


Perella Weinberg Partners LP is serving as Strayer's financial advisor
for the transaction, with Kirkland & Ellis LLP serving as its legal

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 (
and the Capella Education Company website (
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#

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

Forward Looking Statements

This communication contains certain forward-looking statements made
pursuant to the Private Securities Litigation Reform Act of 1995 (the "Reform
"). 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
  • 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,
in the "Investor Relations" tab at the top of the page, or at the SEC's
website at
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,
in the "Investor Relations" tab at the top of the page, or at the SEC's
website at
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
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
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 Comments and Join the Discussion!