DSU to acquire Wesley in ‘once-in-a-generation’ deal

Wesley College’s campus in Dover | PHOTO COURTESY OF WESLEY COLLEGE

DOVER – Delaware State University and Wesley College have signed a definitive agreement for DSU to acquire Wesley by June 30, 2021, in an acquisition that DSU President Tony Allen described as a “once-in-a-generation opportunity [that] matches our highest aspirations and will be a defining moment for our future.”

As reported earlier this week by the Delaware Business Times, under the terms of the agreement, the two schools will now go through a transition year with tollgates, predicated on DSU obtaining outside resources – most likely involving Delaware’s congressional delegation – to fund the acquisition. DSU will also need to conduct a deeper review of Wesley’s finances and obtain approval from their governing and accrediting bodies.

In addition to DSU not being asked for a cash payment from its balance sheet, it will get a 50-acre, 20-building campus with an appraised value of $33 million and fairly low debt service.

DSU will also be looking to renegotiate contracts with shared vendors, including food service provider Aramark and IT vendor Ellucian, and will look at opportunities to consolidate administrative roles and athletic facilities. The school will also use Wesley dorms this fall to support its efforts to provide social distancing for on-campus students.

“Several contingencies must be satisfied to ensure the success of this deal,” Allen told the university community in a letter distributed in advance of a late-afternoon July 9 press conference. “However, if we are successful, this will be a historic moment for Delaware State University and our proud Historically Black College and University (HBCU) community. Delaware State University will be the first HBCU to acquire another institution.”

Allen said DSU needs to increase the size of its footprint, build on its key academic programs, grow its research base, and enhance its economic impact on Delaware in order to “serve more students who need our brand of excellence, education, and care. It is also clear that the University needs a more direct connection to the economic, social, and cultural life of downtown Dover, one ripe with opportunity, particularly for people of color.”

In short, Allen said, the acquisition of cash-strapped Wesley which has been looking for a merger partner for more than a year, represents a significant step toward DSU’s vision “to be the most substantively diverse, contemporary, and unapologetic HBCU in the country.”

In presentations to the state legislature’s Joint Finance and Bond Bill committees earlier this year, Allen reported that DSU has grown 40% over the last decade.

“That runs counter to what’s happening at other colleges and universities nationally, which have lost 5.3% of their student bodies over the same time period,” he said.

The acquisition would turbo-charge DSU’s growth plans. The university, which has just over 5,000 students, believes it can retain the 900 to 1,000 Wesley students who will pay just over $27,000 for the 2020-21 school year, compared with DSU’s published tuition and fees of $8,258 for in-state students and $17,294 for out-of-state students.

DSU has seen 24% growth per year in its graduate-school enrollment over the past two years, and DSU Online has been growing at an annual rate of about 20%.

By comparison, undergraduate enrollment at Wesley was 1,035 for fall 2019, compared with 1,228 for fall 2018, 1,447 for fall 2017, and 1,600 for fall 2013, according to its website.   

One of the biggest concerns going into the discussions, which started in March, was whether the two student bodies were compatible. However, Wesley is a “minority-serving institution,” which is a federal designation and emblematic of their student demographic profile.

One of the biggest concerns going into the discussions was whether the two student bodies were compatible. | DBT GRAPHIC

Wesley’s nursing program is considered one of the best in the state and provides a large portion of Delaware’s health care workforce. Its accredited Master of Occupational Therapy program, which Wesley started when Clark arrived at the university, is the only one in the region. In 2019, the school had roughly 400 to 500 applicants vying for 40 nursing program slots, and its first class from the occupational therapy program had a 2019 pass rate of 100%, which is significantly higher than the national average, Clark said.

During Clark’s tenure, Wesley has reduced expenses and improved its range of academic offerings, but it has been battling well-documented financial challenges, including declining enrollment and falling revenue, a situation that was not helped by the university needing to refund room and board costs to students during the pandemic.

DSU commissioned an economic-impact study in 2017 through the University of Delaware that estimated DSU contributed $266 million per year to the state economy. That figure could increase 30% to 40% with the acquisition of Wesley, Allen said.

Clark, the former commandant of the U.S. Naval Academy who came to Wesley in 2015, has argued that Wesley, a private school, should be eligible for state funding since more than 50% of its students are Delawareans and more than 80% of its graduates stay in Delaware after graduation.

“Wesley employs 500 people from full professors, students, staff, maintenance, adjuncts, and we provide $80 million a year – and that’s conservative – to our region,” he added in the interview last year.

Since 2018, the private college has received a total of $6.375 million from the state, which did provide a bit of a lifeline earlier this year when it agreed to let Wesley receive up to $3 million, buying the school additional time to find a merger or acquisition partner. It has accessed about $1.8 million of the new commitment.

Allen said the road ahead will be challenging but he is optimistic that the merger will be completed if both schools work together.

“We will be discussing this acquisition, examining its terms, and making plans to deal with its implications over the entirety of the next year,” he said. “These discussions will begin immediately, and everyone at every level will be provided the opportunity not just for input, but to settle in and help get the work done.”

This is a breaking story and will be updated following this afternoon’s press conference. For more information on the background of this deal, go here.

By Peter Osborne

posborne@delawarebusinesstimes.com