Education

Minister pressured uni into merger talks

Troubled Lincoln University was dragged into merger discussions by the Education Minister, emails released to Newsroom show. David Williams reports.

Education Minister Chris Hipkins dangled the prospect of disestablishment while pressuring Canterbury’s Lincoln University into merger talks last year.

Emails released to Newsroom also suggest it was a University of Canterbury approach to Ministers – including Finance Minister Grant Robertson – that spurred Hipkins into action. Fellow Labour Ministers Damien O’Connor and Megan Woods were involved in later discussions.

Robertson and University of Canterbury refused to comment yesterday, while Lincoln University, which specialises in agricultural teaching and research, didn’t respond with comment by publication deadline. (On Tuesday afternoon it said it wouldn’t make any comment.)

Asked yesterday where his concerns about Lincoln came from, Hipkins says in an emailed statement that Lincoln had made “little progress” in implementing the recommendations from a 2017 advisory board report and faced a range of financial risks.

That’s academic – for now. Hipkins scrapped the merger plan in July, saying the costs, estimated to be between $124 million and $160 million, far outweighed the benefits.

He tells Newsroom: “Over the past year, Lincoln’s financial situation has improved, largely on the back of a $45 million insurance settlement in early 2019, and the joint facility project [with AgResearch] no longer progressing – which would have put Lincoln’s financial situation under significant stress. There has also been changes to Lincoln’s governance and management team.

“Given the improvement in Lincoln's financial situation, I decided not to proceed with the proposal.”

Lincoln, cut adrift from the University of Canterbury in 1990, has struggled with its finances and to attract domestic students, leading to regular calls for it to merge with a larger institution to increase its scale – and relevance. (According to Government figures, Lincoln University had 2405 equivalent full-time students in 2018. The next-smallest, University of Waikato, had 10,270 EFTS, while University of Canterbury had 14,070.)

The Government is particularly interested in expanding Lincoln’s role as the country struggles to fill agricultural jobs, and train enough scientists to help improve the industry’s efficiency, productivity, sustainability, and profitability.

Hipkins’ decision not to pursue a Lincoln-Canterbury merger is at least the third time in the last decade that Lincoln has fended off such a proposal. However, the Minister refuses to rule out another attempt.

Lincoln University’s management might now be wary of the Minister’s intentions, considering the correspondence reveals it was blindsided by last year’s developments.

“I believe considering the future direction of Lincoln is now necessary as a matter of national interest.” Chris Hipkins

It took more than a year – and the intervention of Chief Ombudsman Peter Boshier – for the backstory of the Lincoln-Canterbury merger talks to emerge. Newsroom’s Official Information Act request for Lincoln’s correspondence with Hipkins was initially denied by the university. It had a change of heart after Boshier provided his provisional opinion. The information arrived last Friday.

In May last year, then Lincoln chancellor Steve Smith (who has since left to pursue wine-making) wrote to Hipkins requesting a meeting to clarify the Government’s position on the university. He had been surprised to learn of a merger proposal the University of Canterbury was expecting to send to Hipkins and Robertson later in the year.

Smith met the Minister on May 29. Clarity about the Government’s position was swift and direct, as detailed in a letter Hipkins wrote to Smith that same day.

“I am keen to actively explore the possibility of merging Lincoln with another New Zealand university to boost Lincoln’s contribution to the land-based sectors, and to ensure that the benefits associated with the Government’s investment in Lincoln can be realised,” Hipkins writes. He agrees with the 2017 advisory board report that Lincoln should aim to become a world-leading agri-university, but is concerned it isn’t going to achieve that goal alone.

His doubts come from falling numbers of domestic students, delays in the business case for the AgResearch joint venture, revenue being “well below budget”, and “limited progress” on the adopting the board report’s goals. (A key goal is known as the “Lincoln Hub”, making the university central to the town’s innovation and research. That has distilled into Blinc Innovation, whose partners are Lincoln University, AgResearch, DairyNZ, Manaaki Whenua-Landcare Research, and Plant and Food Research.)

“I believe considering the future direction of Lincoln is now necessary as a matter of national interest.”

University of Canterbury’s approach to Ministers about a merger “brought forward my thinking”, Hipkins admits, but he wants a “wider range of innovative options” to be considered. He wants proposals from New Zealand universities through expressions of interest (EOI) to the Tertiary Education Commission – and for Lincoln to be “actively involved”.

“If the EOI process identifies an appropriate possible partner, I am required to consult on the disestablishment of Lincoln and its incorporation into another institution.”

He is adamant any change won’t change teaching and research being done at Lincoln, that the Government remains committed to the AgResearch joint venture (abandoned earlier this year) and there should be “strong consideration” of retaining the Lincoln brand. He asks for Lincoln’s feedback within eight days.

‘Vulnerable position’

A crisis meeting of the university council is called.

Hipkins’ message, that disestablishment was on the cards, comes as a shock. Smith writes to the Minister on June 1, begging for more time to respond, which Hipkins grants. While the university council is committed to constructive dialogue, Smith says, a merger raises the prospects of risks – not only for the university but also the Crown.

News of a “takeover” plan could hurt student recruitment, staff morale, quake insurance settlements, a construction tender for the joint facility, and recruitment of a new vice-chancellor. These uncertain winds could also blow ill for partnership talks with industry organisations, other universities and Crown research institutes.

“In short, your letter places us in a very vulnerable position,” Smith writes.

Merger rumours are already swirling on campus and in the media, the letters says. (He notes later that the University of Canterbury’s approach about a potential merger was thought to have been made to Finance Minister Robertson. Asked if his boss advocated for a merger, Robertson’s press secretary bats the query to Hipkins’ office.)

Smith writes to Hipkins: “If the perception arises that a ‘forced takeover’ of Lincoln is underway, your office and ours will find that very difficult to manage.”

The council’s full response, sent to Hipkins on June 12, urges the Minister to set aside the EOI process – and the “proposed investigation to disestablish Lincoln”. Its alternative comprises a bid to “accelerate achievement of the goals set out in your letter” through an “acceleration taskforce” that would be “Lincoln-led”.

This “ambitious programme” would pursue greater collaboration with “tertiary sector peers (including the University of Canterbury), the CRIs, industry, iwi, and public sector agencies like MPI, Tourism and Regional Development”. A “menu” of potential initiatives was being drawn up and could be completed by July 30.

Smith’s letter paints a picture of two years of uncertainty, with serious consequences for “confidence and morale”. “Significant value would be eroded.”

Lincoln’s performance is more positive “than you perhaps realise”, Smith counters. He attacks Hipkins’ arguments about falling domestic student numbers, the reasons for delays in building the joint facility with AgResearch, the university’s financial position, and its “limited progress” on implementing the 2017 report recommendations.

A further meeting is held on June 17, after which Smith writes to Hipkins underlining the “significant risks” from “the threat of disestablishment”. “To this end, Minister, we respectfully request that you take the threat of disestablishment off the table as soon as possible.”

The nuclear option remains, however. Hipkins writes on July 4 that he’s meeting with Ministers that week to discuss Lincoln’s future. “At this stage, I am keeping all options on the table with regard to how we get the best outcomes for New Zealand.”

Lincoln offers a jointly awarded Master’s programme in Europe, and four degree “pathways” with Chinese universities. Last year it announced a partnership with a Sri Lankan institution. Photo: David Williams

Hipkins’ substantive reply comes on July 30, his concerns unswayed, and still focused on Lincoln’s looming financial squeeze.

After discussions with Robertson, Agriculture Minister O’Connor, and Woods, the Minister of Research, Science and Innovation, he decides to stick with his original plan – to call for expressions of interest.

“Given our discussions over the past two months, I realise that this decision may come as a disappointment to you,” Hipkins writes to Smith. “However, I believe the EOI process will provide the best chance to achieve the outcomes that we are both seeking for our land-based sectors and our tertiary education system.”

The Minister says he is open to all options. But if a viable merger option is found, he will decide whether to consult on a proposal to disestablish Lincoln and incorporate it into another university. He is still “very keen” for Lincoln’s council and management to cooperate with TEC.

Hipkins tackles Smith’s contention, in the June 12 letter, that some of the Minister’s concerns are based on “several factual discrepancies” and misunderstandings. “In most cases I believe you have simply offered an alternative view of the issue rather than identifying any genuine factual error.”

The strongest language used, perhaps, is regarding the joint facility project delays. Hipkins agrees it could be argued the recent delays were prudent for risk management, but “the delays have also resulted because of poor planning”.

Lincoln’s finances have improved over the past two years, but largely because of reducing costs, the Minister says. “With a significant amount of costs already removed from the business, there is little room to make further cuts if required and the focus needs to be on increasing revenue.”

There will be short-term uncertainty at the university, Hipkins admits. “However, as you note, uncertainty already exists due to the current merger rumours … as well as delays to the joint facility project. I believe a number of your key concerns can either be addressed or mitigated through a strong communications plan, and by the design of the EOI process.”

He adds: “A key issue for me will be ensuring that staff and students are clear that there is a future at Lincoln.”

Sudden and successful pivot

Two weeks later, in the face of what might be viewed as an unpalatable plan, Lincoln University makes a surprise pivot towards its one-time parent institution. It gambles that Hipkins will accept a proactive attempt to re-join Lincoln and the University of Canterbury, kicked off by the memorandum signing.

Smith writes: “Minister, we respectfully request that you give this serious consideration. We truly. Believe we can mitigate risk and achieve the significant step-change New Zealand requires in university level education and research in the land-based sectors, that we both have ambitions for, in a relationship or possible merger with the University of Canterbury and various other partners we will engage with during this process.”

He adds: “If you remain unsatisfied with our proposal you still have the right to follow your intended approach.”

It has the desired effect.

Hipkins writes on August 21 to say he’s deferred the EOI. But he notes: “As stated in your letter, the Lincoln Council has resolved to participate and cooperate in an EOI process with other New Zealand universities if Lincoln and UC are unable to produce a proposal that satisfies the goals and objectives of all parties.”

The universities’ joint plan is submitted last December. It takes until July for Hipkins to officially scrap the merger proposal. Lincoln and Canterbury said last month their closer working relationship has resulted in joint initiatives and discussions.

“We see the Minister’s decision as a vote of confidence in Lincoln and a major commitment from the Government to the land-based sectors,” the university’s acting vice-chancellor Bruce McKenzie says in a press statement last month. “I feel extraordinarily positive about the future.”

That’s quite optimistic, considering the merger plan was scuppered, in the main, because of a heavy price tag.

Indeed, it seems likely that Hipkins’ finger still hovers above the nuclear “disestablishment” button. He tells Newsroom: “There’s no need to consider a merger as long as Lincoln delivers on its potential.”

* This story has been updated to state that Lincoln University wouldn’t comment.

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