Phoenix Business Journal: GCU won’t go private (most likely)

Career College Central Summary:

  • Grand Canyon University Education Inc. (Nasdaq: LOPE) now has less than a 50 percent chance of going private.
  • This is what I learned this morning while interviewing GCU President Brian Mueller at my latest Inside the Reporter's Notebook event.
  • Over the past several months, Mueller has been looking into taking the Phoenix publicly traded company private, but it's been an uphill battle, as shareholders aren't too keen on even taking a 15 percent premium on a buyout.
  • Last month, Mueller told analysts in an investor conference call that he gave up seeking $500 million in donations to take the company private, and that if the company were going to raise $2.5 billion to pay off shareholders, it would have to come from debt.
  • Today, during our one-on-one interview at GCU's campus, Mueller said he always thought there would be a 50-50 chance of taking GCU private. But now, he said, there is less than a 50 percent chance of that happening.
  • "The shareholders are very, very bullish on this," Mueller said. "The shareholders are saying the market for this is so strong. We might offer a 10 percent or 15 percent premium. It's been clear to us over the last couple of months that they're not going to take it."
  • GCU has enjoyed 17 consecutive quarters of beating analyst expectations, making shareholders very reluctant to give up future returns on their investments — even with a 15 percent premium.
  • "I don't know if it's going to work the first time around," he said. "Even if it doesn't, it's forced the discussion about how should universities be classified from a tax perspective."
  • Grand Canyon will pay $75 million in taxes this year and another $100 million in taxes next year, Mueller said.
  • "We're competing against state universities and private universities that are not-for-profit and don't pay taxes," he said.

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