The Los Angeles-based Dream Center Foundation announced today that it is planning to purchase the for-profit Education Management Corporation for an undisclosed amount and convert the company and its three higher education institutions into nonprofits.
The foundation would acquire Argosy University, South University and the Art Institutes if the sale is approved by accreditors and the U.S. Department of Education. The deal doesn’t include Brown Mackie University, which is closing its campuses.
EDMC, one of the nation’s largest for-profit institutions, has a total of 102 locations in 32 states. It enrolls roughly 65,000 students. While the chain includes recognizable brands, it has struggled with decreases in enrollment and revenue, as well as federal and state investigations. For example, in 2015 the company agreed to $202 million in settlements with the Obama administration and a large group of state attorneys general over allegations that it engaged in deceptive practices and illegally paid bonuses to student recruiters. EDMC did not admit wrongdoing in either case.
The company, which went private in 2014, declined to publicly disclose the sale price.
“For three years the Dream Center Foundation has actively explored educational partnerships or acquisitions that might enhance our ability to provide quality education to scores of Americans through our Dream Center in Los Angeles and via our partners nationwide,” Randy Barton, managing director of the foundation, said in a written statement.
The universities would be managed by Dream Center Education Holdings. Brent Richardson will be the nonprofit’s chief executive officer and co-chairman. Richardson was formerly chief executive officer at Grand Canyon University, a large Christian for-profit college.
The Dream Center, which is a Christian missionary organization sometimes described as Pentecostal, funds programs that primarily provide education, emergency food, medical services and transitional housing to homeless families, young people and veterans in 41 states and 21 countries.
However, Barton said in an interview with Inside Higher Ed that the EDMC institutions will remain strictly secular after the acquisition.
“The Dream Center, although faith-based, serves everyone regardless of faith affiliation,” he said.
EDMC’s chief executive officer, Mark McEachen, said the company entertained a few purchase offers, some that would have offered a higher price, but chose the Dream Center because of its mission and commitment to keep the institutions non-sectarian.
“This deal wasn’t about price. It was about fit and finish,” McEachen said. “We are really removing fully … the legacy of the for-profit EDMC history and now they have a fresh start and there are things the Dream Center can provide that we could never.”
An affiliate of the Najafi Companies will finance the transaction, along with additional funding from the Richardson Family Trust, to which Brent Richardson is connected.
After the deal goes through, the Dream Center plans to reimburse Najafi for its contribution, plus interest. And the Dream Center intends to invest a percentage of revenue generated from the EDMC institutions into charitable organizations.
“While the Dream Center will continue to operate these institutions as they have operated, we will bring to them an expanded vision,” Barton said. “They will be community-focused, not-for-profit institutions coupling their quality programs with a humanitarian culture that values social responsibility.”
More on the EDMC sale will appear in Inside Higher Ed Monday.
Read more at New Nonprofit Owner for EDMC.