An investor-backed company is buying the nonprofit Dana College, a 125-year-old financially struggling institution that gained notice in 2007 after a major benefactor told it and another similarly stressed college nearby that he would no longer donate for their big-ticket projects unless they merged some operations.
That tough-love threat, from the energy-company executive Howard L. Hawks, was designed to help ease financial pressures at Dana and Midland Lutheran College, both in Nebraska, but the mergers never materialized.
Dana’s buyer is a newly formed entity called Dana Education Corporation, headed by Raj Kaji. He declined to provide any financial details about the transaction except to say that the company is backed by private-equity funds.
Mr. Kaji, who will become president of Dana, had previously worked at Laureate Education, the company that owns the all-online Walden University and many institutions overseas. The new provost and chief academic officer will be C. Ronald Kimberling, a former assistant secretary of education under President Ronald Reagan and, more recently, a campus president and executive with Career Education Corporation and Education Management Corporation.
The new arrangement was announced to the college’s 135 faculty and staff members Tuesday afternoon.
Dana is the latest of a growing list of financially ailing nonprofit colleges that have been bought by, or have affiliated with, corporate entities. Those institutions include Daniel Webster, Kendall, and Waldorf Colleges, the College of Santa Fe, and Myers University (since renamed Chancellor University).
Ripe for Takeover
Dana certainly fits the profile for a takeover candidate. In January 2009 it stopped making contributions to retirement accounts for its 135 employees for financial reasons, and last year it was one of more than 100 nonprofit colleges to fail the U.S. Department of Education’s financial-responsibility test, which subjected it to special monitoring by the government as a condition of remaining eligible for federal student aid.
Typically, companies that acquire colleges have the goal of using them (and their accreditation status) as platforms for new, profitable distance-education ventures. At Daniel Webster, the president who negotiated the deal and expected to stay on was dismissed a few months after the deal was announced, along with several faculty members.
Mr. Kaji said that plans called for Dana’s current president, Janet S. Philipp, to remain with the institution as senior vice-president for student engagement, and said that he had announced that “no faculty positions are going away.”
He said this transaction would “operate a little differently” than others have, adding that his goal is to focus on Dana as a residential institution, building its enrollment from about 500 to about 1,000.
Dana has all the characteristics of the kind of institution considered vulnerable in today’s competitive higher-education environment: It’s a small, religiously affiliated, rural, liberal-arts college in a state where the number of 18-year-olds is declining.
Still, Mr. Kaji said Dana can be turned around without changing its mission or focus. “Dana is a great opportunity in itself,” he said.
Over the past several months, he and Mr. Kimberling had been exploring the idea of creating a for-profit college with a study-abroad focus (the working name for the venture was Global College LLC), but Mr. Kaji insisted that Dana, despite a focus on study abroad, is not a stalking horse for that venture. “We’ve moved beyond that,” he said by telephone from Dana’s hometown in Blair, Neb., just north of Omaha. “Heck, I’m moving here.”
By bringing new resources to Dana, we can “make it a more attractive proposition” to students, he said. “We feel they’ve been undermarketed.” The college spent only $25,000 on marketing last year, he said.
Neither he nor Ms. Philipp would comment on the college’s finances. According to its tax records for the year ending May 2008, the latest publicly available, the college ran an annual deficit of $2.5-million on a budget of just under $19-million, and had more than $14-million in bonds and other debt.
The endowment, which was worth under $20-million at that time, will be transferred to a foundation related to the college, and proceeds from it will be used to support programs associated with an archive of Danish-American artifacts, as well as alumni affairs, and the campus ministry. Ms. Philipp said the college would retain its association with the Evangelical Lutheran Church in America. The college is expecting to convert to its new governance structure during the summer.
Ms. Philipp said she has sent a letter to the college’s 11,000 alumni Tuesday, informing them of the change. And she also plans to contact Mr. Hawks, the donor who had once hoped mergers would help both Dana and Midland Lutheran gain financial strength.
