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Two for-profit colleges will merge

Strayer Education and Capella Education, which have 80,000 students across the United States, will combine forces in a $1.9 billion deal.

Strayer Education and Capella Education have agreed to merge in a $1.9 billion deal that will create one of the nation's largest's for-profit college companies.

Forbes reports that, together, the universities will reach some 80,000 students across all 50 states. The schools will continue to operate as independent and separately accredited institutions.

The deal will be structured as a stock-for-stock merger. After the transaction, Strayer shareholders will own about 52 percent of the combined entity and Capella shareholders will own the remaining 48 percent of the company. 

The combination is expected to achieve certain cost efficiencies at the corporate level; the companies say that should help them offer more affordable degrees and improve career prospects for students.

"We have been admirers of Capella's innovation and expertise in online education for years," says Robert S. Silberman, Executive Chairman of Strayer. "We are delighted to have the opportunity to combine Capella's capabilities with Strayer's 125-year heritage of educating working adults."

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."

For-profit colleges have come under fire for peddling expensive degrees and still frequently leaving students with dim career and earnings prospects. According to one Senate report, 96 percent of students attending for-profit colleges took out student loans, compared with 13 percent at community colleges and 48 percent at four-year public colleges. Enrollments at these institutions have fallen steeply in recent years amid a regulatory and government crackdown;  companies such as Corinthian Colleges and ITT Technical Institute have been forced to shut down. 

However, the status of for-profit colleges have improved since Donald Trump became president. Earlier this year, the Trump Administration paused Obama-era regulations that would have made federal funding contingent on online university graduates earning a certain amount of income relative to their student loan payments.

The merged company will be based in Strayer's hometown of Herndon, Va. and will be renamed Strategic Education, Inc.

The deal has been unanimously approved by the board of directors at both companies and is expected to close in the third quarter of 2018. It is subject to customary closing conditions, including an approval by the Department of Education and state regulators.

Minneapolis-based Capella Education, which opened its doors in 1993, also offers online degrees primarily aimed at working adults.

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