Saturday, November 27, 2004

DeVry adopts poison-pill in response to a takeover offer.

DeVry Inc (DV) announced today that it has adopted a "shareholder rights plan" (a.k.a "poison pill") to thwart a takeover attempt. No additional details were provided.

The for-profit education sector was very hot over a year ago, with business publications and newsletters recommending some entity or the other. But a series of scandals followed by federal investigations left many of them in a battered state. That is when I jumped in.

Apart from DeVry, Corinthian Colleges (COCO), Career Colleges (CECO) and ITT Educational Services (ESI) look cheap, especially given the past range and sizable institutional ownership. I own all the 3, though I closed most of my Career Colleges position after an unexpected 100% gain in a very short period.

It is still very likely that the feds will follow through and force atleast one of these players to come clean, possibly rendering its shares worthless. But the rest should start engaging in M & A action soon and that should benefit the survivors.

Several of the other players in the sector still remain expensive - e.g. Laureate Education (LAUR), Education Management (EDMC), Apollo University (APOL).

I would still rate the entire sector highly speculative given that some of the feds' charges are very serious.

And my take on poison pill measures ? They are just excuses by management to continue with their utter disregard for shareholders. Don't be fooled by the alternate phrase used by company management for poison pill - shareholder rights plan!


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