The Idaho Board of Education unanimously approved the University of Idaho’s proposal to create a not-for-profit organization to acquire the University of Phoenix yesterday.
The not-for-profit organization, called “NewU, Inc.,” will buy assets and acquire some operating liabilities of the University of Phoenix. UI’s acquisition of these assets and liabilities will allow it to convert UPh from a for-profit institution to a public not-for profit. The purchase price will be $550 million.
To do this transaction, NewU, Inc. will borrow $685 million through the issuance of bonds. The bonds will finance the purchase, closing costs, working capital and reserve funds. Tax dollars will not be used in the transaction, and the State of Idaho will not be obligated to make any payments. If NewU , Inc. misses any payments on the bond debt, UI will be responsible for covering up to $10 million annually. This is all according to a release from the Idaho State Board of Education.
The private equity firm that currently owns UPh will contribute $200 million that will transfer to NewU, Inc. for operating purposes. For the time being, UI expects to receive $10 million annually from NewU, Inc., but that number is expected to increase.
This move seemed to happen quickly, with the announcement coming just one day before the vote by the Board of Education. However, President Scott Green and his team met with the board three times before the vote. On March 22, April 25 and May 15, sessions were held to consider negotiations regarding the acquisition.
Prior to the unanimous decision, multiple board members spoke about the benefits of this move.
“The University of Phoenix is going after the growing market of adult learners,” Board Member Kurt Liebich said. “If we can tap into that market and create career pathways for all Idahoans, no matter where they are in the educational journey, I think it’s going to be a huge homerun for this state.”
According to the UI FAQ page about the acquisition, the main reason for the move is that the universities share a common mission. Both UI and UPh strive to “illuminate and elevate students to be successful in their careers and lives.” They also serve a significant number of first-generation students. The acquisition also gives UI the opportunity to provide more online options as UPh’s classes are mostly online, plus they offer classes in fields that UI doesn’t.
Although UI is acquiring UPh, the universities will operate separately for the time being. UPh will operate in a 501(c)(3) affiliated with UI but will remain an independent educational institution operated by its own president and leadership team. However, UI and UPh will collaborate to explore and evaluate areas of future collaboration and integration.
With the approval from the Board of Education, UI and NewU, Inc. can move forward with the acquisition. There are other regulatory approvals and actions that need to take place, but the transaction is expected to be consummated by late 2023, early 2024.
James Taurman-Aldrich can be reached at [email protected] or on Twitter @jamesaldrich25