It took two years, but a divided University of Arkansas System board of trustees finally got its first public briefing today on President Donald Bobbitt‘s proposal for a nonprofit affiliate to buy the for-profit University of Phoenix.
Trustees reacted to the almost three-hour meeting, packed with complex and sometimes evasive answers, with a mixture of frustration, praise and subdued anger. The 10 board members were clearly at odds on the issue when they finally adjourned after agreeing to vote on the matter in a Zoom meeting at 1 p.m. Monday.
UA System spokesman Nate Hinkel said after the meeting that Bobbitt has indicated Monday’s vote will be on a resolution “signifying board support of the contemplated relationship with TES.”
TES refers to Transformative Education Services Inc., the Arkansas-based nonprofit that would affiliate with the UA System and buy the University of Phoenix. Phoenix would not become a part of the UA System under the plan, and UA System officials have said no public funds would be spent on the purchase. The plan also calls for Phoenix to become a non-profit university as well, though that will be a gradual process.
Although Bobbitt said he and another UA System executive were first contacted about the proposal by the University of Phoenix in April 2021, this was the first meeting where the topic was placed on the board’s agenda. The extent to which Bobbitt has planned to include the board in the decision on whether to pursue Phoenix has been a concern for months.
Even today, Patrick Hollingsworth, the UA System’s interim general counsel, downplayed the significance of the board’s vote, saying it wasn’t legally necessary for the plan to move forward with the federal government in early May. Still, Bobbitt said, “I felt it was important that the board weigh in.”
Perhaps one of the meeting’s more alarming comments came from trustee Kelly Eichler, who also is a deputy chief of staff for Republican Gov. Sarah Huckabee Sanders and who clearly favors the acquisition.
“We are looking at a real funding issue coming up in the next year,” Eichler warned. “The state is not about” to give us more funding. “In fact, it’s going to go down. Places like UAM [UA-Monticello] are going to be in dire need of funding.”
“We’re going to have to get into this realm [more online course focus] if we’re going to compete and if we’re going to stay afloat,” Eichler said. “This acquisition seems like a lifeline to us.”
In a reference to the University of Phoenix’s history of financial and regulatory problems, Eichler said they have been corrected.
Four trustees — Eichler, Ted Dickey, Ed Fryar and Jeremy Wilson — seemed like definite yes votes for Bobbitt’s plan. Board Chairman Morril Harriman and trustee Sheffield Nelson seemed opposed. Trustee Steve Cox voiced frustration that many details of the complex, 2-year-long effort were only now being shared with him and some other board members. Kevin Crass, the newest board member, expressed concerns and said he’s “completely torn.” The positions of trustees Tommy Boyer and Nate Todd were less clear.
Of all the board members, Cox sounded the most frustrated by having so much information dumped on him and others only now and then feeling rushed to deal with it.
“This is the first day I have heard a lot of important information” about this deal. “Is that fair,” on a deal “this big?” he said. “It’s really unfair,” considering “This is over a $700 million deal,” a reference to the maximum cost a source has previously cited. “Thats a lot of money.”
“So please be patient,” Cox said. “I hate to be rushed.”
Harriman said he agreed with Cox. “I have made these exact same comments.”
Even so, Julie Micelli, a Chicago attorney working on the proposal, said, “Time is of the essence” as an application relating to the proposal is due at the federal Higher Learning Commission on May 2.
Micelli also said TES has a board of directors. Current members are Ben Hyneman, the TES board president and a former UA System trustee; Fryar; and Gina Terry, a former chief financial officer of the UA System. Micelli said she expects there to be additional TES board members.
Harriman said, “It’s still hard for me to understand” how the Phoenix deal is necessarily a value for the UA System. He said his longtime view has been that the UA System’s purpose is to serve Arkansas.
“That perception” will be “very hard to change,” Harriman said. “We didn’t buy Phoenix bothers me” because we would “have an affiliation with someone with 70,000 students and we have no control over it. This bothers me. I guess I’m not sure this fits. Sometimes I feel like we’ve been trying to fit a square peg into a round pole.”
Another major disclosure today was that the Phoenix deal, even if things go smoothly, probably won’t close until early December.
Further, Fryar said that the UA System was “the only person talking to Phoenix” about a purchase until a “leak” in January.” Fryar’s reference was to a tip that led to an Arkansas Times story that broke the news of Bobbitt’s until-then highly secretive proposal. Since then, other news publications, including The Washington Post, have written about the proposal.
Fryar said four other universities now are talking with Phoenix, though he later said he had heard that information from a third party. He said, though, that he was “absolutely” sure at least two other institutions are now talking with Phoenix.
“To me, at the end of the day, this is a conversation about growth,” Wilson said. Companies can either grow or “become irrelevant and die.”
Dickey said he thought the deal — which Bobbitt has said would include a licensing agreement bringing in $20 million annually to the UA System — might help lower tuition within the UA System and could also help fund deferred-maintenance needs.
Nelson, however, said he was “really concerned” that Phoenix is not a university “with a great reputation.”
“The problem is, they didn’t even realize they had a problem,” Nelson said.
Boyer asked repeatedly what the valuation for the deal is. He got a bunch of numbers that would take a calculus major with an economist on the side to interpret. Finally, Stephens Inc. representative Marshall McKissack started to answer. But by the time he got out $535 and before he said the word “million,” he got the message to shut up on that score and did, saying that the price was “confidential.”
In fact, the Times has previously reported that the deal is estimated to cost $500 million to $700 million, and Bobbitt recently confirmed to The Washington Post that the Times’ minimum estimate was accurate.
Fryar made one legal slip, owning up to a conversation he had Monday night with Harriman about the matter. “I don’t think we should vote today. Morril and I talked last night.”
Considering the two years of secrecy surrounding Bobbitt’s proposal, I have to say this admission didn’t upset me too much even though I’m confident it was a violation of the Arkansas Freedom of Information Act.