An analysis by one retired and two current Rider University professors raises questions about the financial health of the prospective buyer of Rider’s Westminster Choir College, in a deal the professors suggest could end up costing the university millions of dollars.
The 13-page paper, written by professors Gerald Klein, Arthur Taylor and Michael Brogan, was completed for the university’s faculty union, the Rider chapter of the American Association of University Professors (AAUP).
The union, which opposes the sale of Westminster Choir College, released the report during the same week as alumni reunions at Westminster starting May 10 and graduation on May 12.
In their May 1 paper, the authors argue that Beijing Kaiwen Education Technology Co., the China-based firm looking to buy the choir college and its 23-acre Princeton campus for $40 million, “clearly lacks the cash resources to simply complete the purchase of Westminster.”
Relying on financial reporting about Kaiwen in The Wall Street Journal and elsewhere, the report states that in “the past two years, Kaiwen has been spending far more than it has been obtaining in revenues.”
“Kaiwen and its previous incarnation, a bridge steel fabrication company, have been money-losing operations,” the authors wrote.
A Kaiwen representative could not be reached for comment. The company runs two K-12 schools in Beijing.
Jeffrey Halpern, a Rider professor and AAUP official, said on May 9 that Kaiwen is “bleeding money” and full of “red ink.” He pointed to a declining stock value for a company he said has no experience in higher education. Kaiwen stock was at 12.61 ($1.98) Yuan per share at the close of trading May 9.
“From our perspective, this casts a real pall on the notion they’re going to be able to run Westminster in the same way it has been run, that is to say, as an elite choral college,” Halpern said.
The report also notes that in 2017, the company reported a net income of 23 million Yuan, despite posting earlier losses. The authors, though, cite as a concern the company’s balance sheets, showing 934 million Yuan in liabilities compared to 178 million Yuan in cash and cash equivalents
A Rider University spokeswoman could not be reached for comment.
Klein is a retired professor of organizational behavior and management, Brogan is a professor of political science and Taylor is a professor of information systems. Taylor is also the former president of the faculty union.
Toward the end of the report, the authors state that while the sale price is $40 million, Rider will have to give up about $20 million, “the value of Westminster’s endowment,” to the buyer.
Also, Rider is in a legal battle with the Princeton Theological Seminary, which is owed a $2 million note with interest if the choir college campus is sold, based on an agreement between the two institutions in the early 1990s.
“Additionally, as the lawsuit by the Princeton Theological Seminary contends, Rider would need to relinquish approximately $8 million of any sale proceeds to the Princeton Theological Seminary and repay the $8 million it has borrowed using the Princeton property as collateral,” the report states.
When those amounts and the roughly $1 million Rider paid to a consultant to shepherd the sale are subtracted from the $40 million, “Rider would only be left with $3 million in proceeds from the transaction … ” the authors said.
That amount could be reduced further, depending on any settlement with alumni and others suing Rider to block the sale, they argue.
“If, in the end, Kaiwen negotiates the sale price 20 percent to 40 percent below the asking price, a common occurrence in business transactions, then Rider would realize a net loss of between $5 million and $13 million,” the professors suggested.
Westminster, a once independent music school, has been a part of Rider since 1992, but the university is ending that arrangement.
The transition from Rider to Kaiwen was supposed to happen this year, but it was pushed back. Rider officials announced in March that the university would continue to operate Westminster for another academic year.
On its website, Westminster reports having 439 undergraduate and graduate students, combined. Tuition, room and other expenses for one year costs $58,400.