Touro College Will Sell Online Division to Private-Equity Fund

The nonprofit Touro College announced this morning that it had signed a deal to sell its 7,500-student online division to a private-equity fund — in a transaction that signals investors’ continuing confidence in distance education as a way to make money in higher education.

The buyer is Summit Partners, a $9-billion private-equity firm based in Boston and Palo Alto, Calif. The price was not disclosed, but Summit’s Web site says the firm’s private-equity investments can range from $25-million to $450-million. Touro plans to use the proceeds from the sale to bolster its endowment, which stood at about $35-million in the fall of 2006.

Yoram Neumann, who now manages the separately accredited institution, will remain to run the venture as president and chief executive officer once it is spun off as a separate for-profit company.

Parties familiar with the terms of the transaction said the university would retain a small stake in the new venture, as will Mr. Neumann. The division, Touro International University, had been on the market since last fall.

The sale is expected to be completed by the end of September, assuming Touro International’s accreditor, the senior-college division of the Western Association of Schools and Colleges, approves the request for a “substantial change” in status. The institution is incorporated in California. The U.S. Education Department must also approve for the deal to close.

Under new owners, Touro hopes to expand its reach beyond the military market, which has been a major source of students since its founding, in 1998. About two-thirds of Touro International’s students attend with tuition reimbursements from the Defense Department.

The sale also marks a notable bit of good news for New York City-based Touro College, which this month saw two of its former administrators indicted in a cash-for-grades scheme. —Goldie Blumenstyk