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Community College Venture Sold
As part of an effort to “get back to its core” business, the Princeton Review announced Monday that it will sell the business line it created last year to provide community colleges with fast-track academic programs to expand their enrollment capacity. The company said it would unload the Community College Partnership division for $4 million to a new entity created by Michael Perik, who championed the new venture’s creation as Princeton Review's chief executive officer but resigned this spring.
Last year, under Perik’s leadership, Princeton Review, through its then-newly acquired Penn Foster subsidiary, signed a deal with Bristol Community College, in Massachusetts, to offer accelerated health science degree programs to students willing to pay higher tuition. The programs are offered in a hybrid format, combining online coursework with in-person labs. Bristol faculty members teach the material, but the courses are delivered by Princeton Review, which pays for the lab equipment and teaching facilities. The only noticeable difference between these and traditional health science programs at Bristol is that the Princeton Review-sponsored programs can be completed in about half the time, but only if students pay $100 more per credit hour — $246 instead of $146. This tuition differential is paid to Princeton Review.
Though the effort was welcomed by Bristol officials, who argued that it was a way to expand access for students in tough economic times without surrendering the institution’s academic integrity, the arrangement faced opposition at other Massachusetts community colleges to which Princeton Review sought to expand. Last fall, faculty at Quinsigamond Community College expressed concern about Princeton Review’s plans to partner with their institution, arguing that it would threaten their community college’s traditional public mission. A deal with that college has yet to be signed.
Princeton Review also had some tough times financially last year. Though its total revenue increased 49 percent, to $214.4 million in 2010 from $143.5 million in 2009, its loss from continuing operations in 2010 was $50.4 million, compared to a loss of $13.9 million in 2009. The company noted that it made only about $254,000 in the fourth quarter of 2010 on its Community College Partnership business, which was formally launched the quarter prior.
By the time of the company’s first quarter filings this year, it had made clear that it was planning to sell the business for $4 million in cash to Higher Education Partners, Perik’s new venture with Gerard Kavanaugh and Monitor Clipper Partners, a private equity firm in Cambridge, Mass.
“The divestiture reflects our renewed focus on our core business and leveraging our core brands,” John Connolly, interim president and CEO of Princeton Review, wrote in an April statement. “It also puts the CCP business into good hands with Michael and Gerry and their team at Higher Education Partners, as they were instrumental in CCP’s creation and development, and have remained passionate about its success.”
After Monday’s announcement of the close of the deal, Princeton Review officials restated Connolly’s earlier remarks, noting that the business was jettisoned to bring the company “back to its core.” Officials also noted that the Community College Partnership venture was “distracting,” both “financially and operationally.”
Still, officials confirmed that the company will continue to own and operate the Penn Foster Education Group, which it purchased in 2009 to offer “career-focused degree and vocational programs” online via the Penn Foster High School, the Penn Foster Career School and its partnership with the National Labor College. Penn Foster will license to Higher Education Partners “certain content of its Virtual High School for use in connection with the [Community College Partnerships] business through 2013.”
Perik did not respond to requests for comment about his new venture and his departure from the Princeton Review. Sally Cameron, a spokeswoman for Bristol Community College, said she does not expect the business deal to affect the health science programs being offered at her college. Also, some faculty critics of the program throughout Massachusetts said they were not familiar with the transaction and did not know how it would affect their view of the program.
Some higher education observers, however, said they were not surprised to hear of the deal.
“It wouldn’t surprise me if the Princeton Review name (i.e., a well-known business trying to get into a very different business), and a community college partnership business alongside an accredited for-profit school (Penn Foster) may have proven a complex combination,” Richard Garrett, a managing director at Eduventures’ Online Higher Education Learning Collaborative, wrote in an e-mail to Inside Higher Ed. “Higher Education Partners, as a separate entity, may benefit from the absence of that 'baggage.' ”
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