The University of Idaho is pursuing a $550 million plan to purchase the University of Phoenix, a for-profit online behemoth serving some 85,000 students.

The university says it will guarantee up to $10 million a year to backstop the purchase — which would be financed through bonds, and executed by a separate nonprofit entity.

The U of I says the deal could bring in $10 million in initial “supplemental education funding” for the university, an amount that the university expects to see grow over time. Meanwhile, as the for-profit school converts to a nonprofit entity, the University of Phoenix would transfer $200 million to its new nonprofit governing body.

The State Board of Education will meet Thursday to discuss the plan. Specifically, the board will consider a resolution authorizing the nonprofit — dubbed NewU Inc. — and authorizing the financing plan.

The U of I has been moving rapidly to position for the purchase, which it hopes to complete by early 2024. But to date, all of the activity has taken place behind the scenes.

The U of I said it was first approached by the University of Phoenix in March. University and State Board members have discussed the transaction in three closed-door meetings since March, board staff said in a memo released Wednesday. The most recent closed-door executive session was held Monday.

Thursday’s meeting will mark the State Board’s first public discussion of the purchase.

On Wednesday, after the State Board posted an agenda for its Thursday meeting, news of the possible purchase traveled quickly. And in a “frequently asked questions” webpage, the university said the University of Phoenix insisted on secrecy.

“Because of the sensitive nature of such a transaction, a very limited number of members of U of I leadership, supported by outside advisors who specialize in the nuances of such acquisitions, worked on the transaction pursuant to a seller-required non-disclosure agreement,” the university said.

And the clock is ticking, the U of I said Wednesday. The purchase needs approval from The Higher Learning Commission, the University of Phoenix’s accrediting body. In order to get a spot on the commission’s November meeting agenda, the U of I and the University of Phoenix must submit their joint application to the commission by Friday.

Elsewhere on its FAQ page, the U of I sought to allay other public concerns:

  • The university downplayed the chances that it would need to provide up to $10 million a year to help the nonprofit make its payments. “Cash modeling has been undertaken and University of Phoenix currently generates approximately $100 million of unrestricted cash flow annually.”
  • The U of I also framed the purchase as a potential moneymaker, providing the public university a new funding stream. “This transaction is about more than revenue, but the revenue U of I does receive may be reinvested in strategic initiatives.”
  • The U of I conceded that the University of Phoenix’s reputation was “tarnished” by meteoric growth in the 2000s, when enrollment surged to 470,000 students. With a current enrollment of 85,000, the U of I says, the University of Phoenix has “refocused and redoubled its efforts on returning to its founding mission of quality education for adult learners.” (The U of I memo did not mention the University of Phoenix’s $191 million settlement with the Federal Trade Commission, reached in 2019 after the agency accused the school of deceptive advertising.)
  • The U of I also downplayed the impact on daily campus operations. The U of I’s online courses will remain intact, and the two universities will provide separate degree paths. The U of I, meanwhile, says it will continue to “invest” in its goal of becoming the state’s first Carnegie Classification-recognized “R1” research institution.

In a memo, prepared ahead of Thursday’s State Board meeting, board staff said the benefits of the purchase outweigh the potential financial risk.

“The acquisition would provide UI and the state of Idaho access to a turnkey platform for delivery of online education at scale,” staff wrote. “It would help address the need for access to postsecondary education in the rural and remote areas of Idaho. Given demographic trends, it will diversify UI’s enrollment and revenue portfolio.”

The potential partnership is not unprecedented.

Several other public universities have acquired online partners, the U of I noted Wednesday.

But the U of I was evidently not the University of Phoenix’s first choice.

The University of Phoenix and the University of Arkansas were discussing a partnership in January, the Arkansas Times reported. In April, a divided University of Arkansas board of trustees rejected the partnership.

This story will be updated Thursday with news from the State Board meeting. Check back for the latest.  

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