Career Ed a Candidate to Go Private, Analyst Says

(Crain’s) — Career Education Corp., its shares lagging despite turnaround efforts by new management, is the leading candidate among publicly traded education firms to go private, according to an industry analyst.

Hoffman Estates-based Career Ed’s stock market valuation remains well below market multiples paid by private-equity investors in 2006 for another publicly traded education company, said analyst Trace Urdan of Signal Hill Capital Group in San Francisco.

He said private-equity firms have called him about industry prospects, but not about Career Ed specifically. At the moment, education companies are buying each other, rather than selling to private-equity firms, in part because of credit conditions.

“But they can’t stay on the sidelines forever,” Mr. Urdan said of private-equity buyers.

Career Ed CEO Gary McCullough and company directors did not return calls seeking comment.

A company spokesman also declined to comment.

Previously, Mr. McCullough, hired in 2007 amid shareholder lawsuits and federal investigations into financial-aid and enrollment practices, discounted buyout prospects but did not rule out a sale. Career Ed’s shares have lost a third of their value since news of his appointment.

The stock closed at $19.72 Wednesday, down $1.14 or 5.5%.

Mr. Urdan said the company is boosting earnings but continues to stub its toe. Generating too many student leads for counselors to handle is the “kind of rookie mistake” he attributes to management new to the industry.

Enrollments have been rising but not enough to offset declines in tuition and fees. First-quarter revenue was down 3.2%, and though earnings rose 42%, they fell short of analysts’ expectations.

“They have yet to nail a quarter that gets people’s attention,” Mr. Urdan said. “It’s an easy name to ignore.” (Chicago Business)

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