In a special board meeting on June 5, the Idaho State Board of Education discussed the University of Idaho’s request to end talks of purchasing the University of Phoenix. The meeting comes after President C. Scott Green’s announcement the day before.
The termination agreement intends to formally end the discussions between UI and UPX. To cover UI’s consulting fees and other expenses from the talks, UPX will pay a termination fee of $17,244,420.11 within 10 business days. The extension fee of $5 million, paid June 28, 2024, will be subtracted from this amount as credit, for a net payment of $12,244,420.11.
Kent Nelson, general counsel for UI, presented the university’s request to the board.
“The university has consistently recognized the potential benefit for the state of Idaho in the collaboration with the University of Phoenix,” Nelson said. “However, we’ve been unable to achieve a closing for the transaction, and we believe that the responsible course now is to step back. We remain grateful to the University of Phoenix for their engagement and wish them well.”
UI had been negotiating to purchase UPX since spring of 2023, with a price tag of $685 million.
The initial announcement came on May 17, 2023, when the State Board of Education voted publicly to endorse the purchase, but talks were happening long before then. President Green and his team met with the board in three private meetings on March 22, April 25 and May 15, and UI began discussions with UPX in February of 2023.
As the purchase came to light, it became clear that it would be highly controversial.
Lawmakers have cited multiple issues with UPX, revealing a “long record of poor student outcomes, deception of veterans, and entanglements in federal investigations and enforcement actions.” Many are concerned that, by buying UPX, UI will be buying its debt.
The university also had a close call with its accreditation in 2023.
On the other hand, proponents of the acquisition hoped it would increase education availability in rural areas and combat a demographic cliff.
Idaho Attorney General Raúl Labrador filed an open meetings lawsuit against the State Board of Education in June of that year, but it was rejected by Ada County District Judge Jason Scott on Jan. 30, 2024. Although a governing body of a public agency must usually hold meetings open to the public, it may hold closed meetings when it “reasonably believes it is in competition” with other bidders. Labrador appealed the decision Feb. 16, 2024.
On Feb. 15, 2024, the House State Affairs Committee voted unanimously to introduce a resolution threatening legal action if the Board of Education did not “reconsider” its endorsement. In an email to The Argonaut, Rep. John Gannon, D-Boise, one of the resolution’s co-sponsors, said, “I want to be sure that students continue to receive a quality education and that the degree continues to have value and I am not comfortable that this affiliation will do that.”
UI would create a not-for-profit organization, NewU, Inc., to acquire the assets by borrowing the cost through bonds. The organization was later renamed Four Three Education, Inc., after a challenge from the Washington, D.C.-based NewU University.
With UI and the State Board of Education facing numerous legal challenges, the board granted a one-year extension of the Asset Purchase Agreement on June 28, 2024, for a new deadline of June 10, 2025. In exchange for the $5 million paid to UI, UPX was allowed to consider alternative buyers.
After the extension, the two universities continued to work together to resolve the challenges the transaction faced. However, it became clear that UPX needed to look for other options that could offer a higher price.
Instead of ending the agreement, the two parties agreed to pause the discussion to allow UPX to pursue other transactions, “but leave open the possibility that the parties would refocus … at a later time,” as per the meeting materials.
But as the June 10 deadline approached, UPX had not reached any decisions with other buyers.
“While the University continues to see the value of a collaboration with Phoenix, and the Seller would like to see the University continuing to wait on the sidelines, doing so has become cost-prohibitive for both,” UI wrote. “The agreement avoids continued legal and financial uncertainties, while maintaining constructive relations between the parties.”
The two universities came to an agreement to terminate the talks. For the financial aspect, the amount to be paid to UI will cover all expenses related to the purchase discussions, despite being less than the full $20 million originally agreed to come with a termination. For UPX, this lower fee is ideal.
Kurt Liebich, president of the Board of Education, reflected on the deal and shared his thoughts on where the two universities now stand.
“It’s really no surprise to me or to any of us on the board that we’ve reached this point in this decision, given the fact that our authority to approve this transaction is still tied up in the legal system, coupled with the optionality of the University of Phoenix and their stated intent to take the University of Phoenix public, really has led us to this point,” Liebich said.
“My read of this settlement agreement is that it’s fair to both sides, which I think has been the spirit of the relationship we’ve had with the University of Phoenix and Apollo for the last two years,” he said. “Both organizations are in incredibly strong positions. I wish the folks at University of Phoenix all the success in the world.”
Liebich expressed his concerns for the future of education and labor in Idaho, including a potential demographic cliff and evolving technology needs. “We have to become more innovative in delivering education through different, more efficient module delivery systems. … A large proportion of Idaho citizens don’t have post-secondary education, and so with the pace that technology is impacting everyday work, we have to be able to reach Idaho adults, no matter where they are in the state.”
“For all those strategic reasons, I thought this deal made sense. Well, now that this deal is behind us, those trends haven’t changed. The same challenges exist,” he said.
UPX plans to “continue to operate as an independent, private institution,” as per their press release.
Dakota Steffen can be reached at [email protected].