University of Idaho calls off plans to buy online university

University of Idaho

After two years of negotiations for the University of Idaho to buy the online University of Phoenix, the parties have called it quits.

The for-profit University of Phoenix announced the decision Tuesday saying it was a mutual decision.

"While we have made the decision to conclude this agreement, we are grateful for the collaboration of President Scott Green, the University of Idaho, and the elected leaders in Idaho in pursuit of what we believe would have been a transformative affiliation for the students of both universities," said Andrea Smiley, a University of Phoenix spokeswoman.

Plans called for Four Three Education, Inc., the non-profit formed by UI to purchase the online university and convert it to a non-profit, to issue $685 million in bonds to finance the purchase through separately secured debt. The two institutions would have continued to operate separately.

Moody's Ratings placed UI's issuer and revenue bond ratings on review for downgrade in February 2024 pointing to the $550 million cost of purchasing the online university, which Moody's analyst Patrick Ronk described as a "substantial increase" in the university's debt.

Analysts told The Bond Buyer the downgrade could be multi-notch and dependent on how much debt the A1-rated university issued. UI only had $130 million in rated debt outstanding as of June 30, 2023, according to the Moody's report.

A University of Idaho spokesman said it will formally end talks by asking the university's Board of Regents to approve a termination agreement on Thursday.

The online university has agreed to pay a termination fee of $17.24 million, with credit for the $5 million already paid for the extension agreement in June 2024, to reimburse UI for costs incurred, according to the university.

The Idaho land-grant university had hoped to expand its reach to adult learners, online students and to benefit from the University of Phoenix's expertise in delivering workforce training, but the deal had "become cost prohibitive, and potentially distracting to our other work," said UI President Scott Green.

The deal faced skeptical state lawmakers and a legal threat from Idaho Attorney General Raul Labrador over allegations the board and university officials hadn't properly publicly vetted the concept before entering into an agreement to purchase the online university.

Smiley wouldn't comment specifically on reports that University of Phoenix parent companies Apollo Global Management Inc. and Vistria Group were contemplating taking Apollo Education Group, the online university's holding company, public in March, and whether that is still in play.

The university "will continue to actively evaluate strategic opportunities presented to us that align with our mission," Smiley said.