One View on Why the Rice-BCM Merger Failed

Last Thursday, I was at the Jones School to watch the new documentary Haynesville (which was excellent and about which I may blog later). While there, I got into a conversation with one of my old professors. I'll call him Professor X to preserve his anonymity (he does not, as far as I know, have psychic powers, and he is definitely neither bald nor confined to a wheelchair).

We got to talking about the failed BCM-Rice merger. He was really, really bummed about it. He didn't claim to be an insider to the negotiations, but he knew some insidery stuff. Specifically, he blamed Baylor University for the breakdown of negotiations (which jibes to a certain extent with what has been reported elsewhere). I asked him about BCM's debt load and risk. Professor X said that on the BCM side, there were philanthropists lined up to make them whole if the merger happened. I argued that that money, given now, is money that wouldn't be given later (say in the form of estate giving). His argued that this money was money that was going to BCM, not Rice, and that if they didn't give it now, they would possibly never give it at all because BCM might cease to exist. In either case, Rice was never going to see that particular pool of philanthropic money. (Not that Rice doesn't have its own supply, obviously.)

Furthermore, Professor X talked about good things that would have happened had the merger succeeded. BCM foolishly burned many bridges in the past few years. In retrospect, it's insane what they did. But the merger with Rice would have been a new day. Institutions who were alienated from BCM were willing to come back on board if Rice was running the show. Specifically, Professor X suggested that Methodist might renew their partnership with BCM. (It was BCM's split from Methodist Hospital that triggered BCM's current downward spiral.) One worry about the merger was that Rice would be joining with an unloved institution that had no teaching hospital. Professor X basically said that being part of Rice would erase the old acrimony.

So what happened? All along, Baylor University had veto power. According to Professor X, they were informed at every step what the merger would mean. This was a process that was started over a year ago, recall. Then at the last second, Baylor U. stood up and started making noises, adding conditions. This was after a year of careful negotiations between Rice and BCM, lining up unprecedented financial help, mending fences with previously alienated partners, etc.

Evidently, the Baylor U. conditions and interference became too much. Professor X dropped a bombshell. It was Leebron himself that ended the negotiations. I can only imagine that he concluded that Baylor U. was trying to sabotage the merger, and that there was no way it could progress. His frustration must have been immense.

Why did Baylor U. do it? Perhaps they believe that they can essentially take all the work Rice did and proceed. After all, Rice apparently has lined up hundreds of millions of dollars to rescue BCM. The reason those people are giving this money is because they believe that it would be a tragedy for Houston to lose BCM. So Baylor may be thinking, even if we elbow Rice out of the picture, the motivation of the philanthropists remains the same--rescue BCM.

We'll see if it works. But in the meantime, I would like to say this to the leadership at Baylor University: thanks a lot, assholes. That was real "Christian" of you.