Henderson Board of Trustees approves merger agreement with Arkansas State University

The Henderson State University Board of Trustees on Thursday (Nov. 21) approved a merger agreement and transition plan with the Arkansas State University System. The agreement is subject to approval of the ASU Board of Trustees and the Higher Learning Commission, as well as action by the Arkansas General Assembly. ASU System President Chuck Welch said the system board will be asked to approve the agreement at its regular meeting on Dec. 6 in Little Rock and the target for completing the transition would be Jan. 1, 2021.

The Henderson board approved a resolution Oct. 24 to join the Arkansas State University System and proceed with development of a merger agreement. The board also voted in favor of Henderson retaining its name and mascot as a member of the ASU System. On July 29, Henderson signed a Memorandum of Understanding for the ASU System to provide various operations support services to the university.

Under terms of the merger agreement, the Henderson interim president would report through Welch to the Henderson board as part of an interim management process. Welch would also chair the search committee for a new Henderson president, who would become chancellor of the institution following the merger.

“We will make every effort for the transition of Henderson into the ASU System to be as smooth as possible for everyone,” Welch said. “The inclusive process for identifying the next chief executive of the institution will be similar to what we’ve successfully done at each of our campuses. I’m confident that affiliation with the ASU System will strengthen Henderson, our institutions and all of higher education in Arkansas.”

Moody’s Investor Services issued a report that determined Henderson’s decision to join the system is “credit positive” for Henderson because of increased oversight expected from joining the ASU System. The Moody’s comments were related to Henderson’s $31 million in auxiliary enterprises revenue bonds, which were downgraded to Baa2 from A3 with a “negative” outlook on July 2, and addressed the impact of the university’s intent to join the ASU System.

“Henderson’s moderate size and manageable leverage mean there will be limited immediate credit impact for ASU from the merger,” the Moody’s report said. “ASU’s system of oversight, which has led to strong fiscal stewardship at its other campuses, is likely to help restore balanced operations at HSU. Henderson’s willingness to cooperative with ASU over the past six months shows a commitment to correcting its imbalanced operations.”

“Governance and oversight by the State of Arkansas will continue to be credit positive for HSU and enhance its strategic position,” Moody’s said. “The state demonstrated solid oversight both through supplying short-term cash flow relief for HSU and encouraging it to join the ASU system.”

Additional provisions of the agreement include:

• Requesting an expansion of ASU board membership from five trustees to seven, with the two new appointees by Gov. Asa Hutchinson having “specific familiarity with Henderson State.”

• Creation of a Henderson Board of Visitors to be appointed by the governor of Arkansas pursuant to legislative enactment. The Board of Visitors would have an advisory function and serve as a liaison to the ASU president and board.

• Giving the ASU System the right to retain a third party to review Henderson’s operations and financial standing. The ASU System has issued a request for proposals for third-party audit services.

• Providing ASU System with ongoing management compensation that is consistent with the current Henderson MOU and the formula used by other ASU System institutions.

Henderson would become the second four-year institution in the ASU System and the third higher education institution to join the system in four years. Mid-South Community College in West Memphis became Arkansas State University Mid-South in July 2015, and College of the Ouachitas in Malvern will become Arkansas State University Three Rivers effective Jan. 1 pending approval of the Higher Learning Commission.