What’s New

The University of Phoenix, once the premier for-profit institution in the country, is taking advantage of its ability to court other options as an acquisition deal with a University of Idaho affiliate inches toward a two-year stall.

Bloomberg this month reported that the online for-profit’s owners, Apollo Global Management Inc. and the Vistria Group, are considering an initial public offering, or IPO, for Apollo Education Group, the holding company for the University of Phoenix. That route, which could reportedly materialize as early as the third quarter of 2025, would shift the company to public ownership, with investors able to purchase stock.

The news comes as a June 10 deadline looms for the University of Phoenix and Four Three Education, Inc. — a nonprofit affiliated with the University of Idaho — to close on a $550-million acquisition that the Idaho State Board of Education first approved plans for in May 2023. In the last two years, a string of legislative and legal hurdles have hamstrung proceedings.

In a statement to The Chronicle this week, the University of Idaho reiterated its continued interest in Phoenix to expand its online offerings, including for adult learners. “Building an affiliation with University of Phoenix is a big, bold proposal that pushes the boundaries of traditional thinking of Idaho higher education,” spokeswoman Jodi Walker wrote. “We continue to seek viable pathways for the deal to move forward.”

Representatives for Phoenix similarly affirmed that an affiliation with the University of Idaho “is still in play.”

But for merger-and-acquisition experts like Mark DeFusco, a senior consultant with Higher Ed Consolidation Solutions, this latest development suggests that a resolution remains elusive.

“If there was something to announce, they would announce it,” instead of floating the possibility of an IPO, he said.

The Details

In June 2024, the State Board approved a one-year extension for the University of Idaho and the University of Phoenix to continue working toward a deal. Under the amended agreement, Phoenix can entertain other potential buyers, as well as an IPO. In return for this nonexclusivity, Idaho received $5 million.

It’s not uncommon for a seller to consider a sale and an IPO at the same time, said Jay R. Ritter, an IPO expert and professor emeritus of finance at the University of Florida. He referred to the “dual track” strategy where a seller might play two options “against each other” to encourage movement.

Some details about a potential IPO, though, have raised eyebrows. Unnamed Bloomberg sources said the market value of Phoenix’s holding company, Apollo Education Group, could land between $1.5 billion and $1.7 billion — a staggering departure from the $550 million purchase price on the table for the University of Phoenix. Apollo Global Management Inc. and the Vistria Group did not respond to a request for comment on that estimate, and whether Apollo Education Group holds other assets apart from Phoenix.

Two Phoenix representatives who spoke with The Chronicle on Thursday underscored that the valuation range is “speculation.” They also confirmed that, to their knowledge, the $550 million price tag in the 2023 agreement still stands.

Outside of an IPO, the representatives would neither confirm nor deny whether the institution is in talks with other colleges, but said Phoenix is “exploring other opportunities” as allowed in the amended agreement. (Phoenix will owe the University of Idaho $15 million on top of the $5 million already paid if they ultimately pursue another sale or an IPO.)

The Backdrop

While a deal between the University of Idaho and the University of Phoenix is not dead yet, legal woes and legislators’ skepticism have snuffed out momentum.

Many state lawmakers have balked at the agreement, questioning the State Board of Education’s authority to green-light the acquisition; the University of Idaho’s multimillion dollar expenditures in pursuing a deal; and the risk that the University of Idaho will be on the hook for student borrower-defense claims tied to the for-profit. (University of Idaho officials have noted that the Phoenix acquisition would come with significant cash on hand to cover unanticipated costs.)

A proposal for the legislature to create its own independent entity to acquire and oversee Phoenix failed in March 2024.

A state Attorney General lawsuit filed in 2023 claiming that the State Board of Education’s approval of an acquisition violated open-meetings law also remains active. The case is back in district court after the Idaho Supreme Court in December overturned a lower-court ruling.

While legislators’ approval and a resolution to that lawsuit aren’t legally required for a deal to close, not having those assurances could leave the parties vulnerable to subsequent lawsuits, and make it considerably more difficult for the University of Idaho’s affiliate to issue bonds necessary to fund the purchase. (The total financing needed is $685 million, which includes the purchase price and other costs, such as insurance.)

Walker reiterated in an email that, “Our legislators are important to us and an important factor in any path forward where the U. of I. continues to pursue this affiliation.”

What to Watch For

A number of outstanding questions remain as this saga continues to play out:

• Will the Phoenix acquisition come up again in the 2025 legislative session?

  No other proposals are scheduled for discussion in the current session, which is expected to end in just a few weeks.
  

• What are the next steps for the lawsuit? Will anything happen before the June 10 deadline?

  Counsel for the state Board of Education and Attorney General will regroup at a “status conference” meeting on April 24, which “is held to schedule a new trial date — plus other deadlines leading up to the trial,” an attorney for the Board of Education wrote in an email.
  

• If the parties do manage to close the deal, will the chaos at the U.S. Education Department — which lost nearly half of its staff this week — add even more roadblocks?

  The Education Department has historically conducted change-in-ownership reviews after transactions officially close to determine whether a college under new ownership will continue to be eligible for Title IV funding. But experts wonder what a handicapped — if not fully dismantled — department would mean for this process.

“The Trump administration has not yet spoken as to who will handle regulatory decisions, or if those decisions will become solely state-based decisions,” said Ricardo Azziz, principal at SPH Consulting Group.

The Phoenix representatives said they were trying to stay optimistic about the in-flux regulatory environment.

Department processes were “slow-going before, and we were prepared for that,” said one. “And if it continues to be slow-going, we’re prepared for that. … It’s too early to tell.”