Capella University: Strayer University to combine under Strayer Education, Inc.

Department of Education sued by 18 states, D.C.

Strayer Education, the for-profit online university, is tying up with Capella Education in a deal worth about $1.9 billion as the U.S. Education Department considers rolling back Obama-era rules that would have erased federal loans for students defrauded by for-profit colleges.

Strayer University (STRA) and Capella University will continue to run as independent institutions with separate boards. Both universities will operate under Strayer Education Inc., with corporate headquarters in Herndon, Virginia. Strayer Education will be renamed Strategic Education Inc.

The transaction is expected to result in about $50 million in annual cost savings within 18 months of closing, which is targeted for 2018's third quarter.

Capella shareholders will receive 0.875 Strayer shares for each Capella share. Strayer shareholders will own about 52 percent of the combined business, with Capella shareholders owning about 48 percent.