DeVry Universally Starts Over with new CEO
Steve’s breakdown: It’s a new day at DeVry and a great time to get acquainted. As you remember, DeVry ran into so trouble with deceptive advertising practices. But that’s behind them and we expect an agency review.
DOWNERS GROVE, IL: DeVry Education Group replaced CEO Daniel Hamburger amid a stock slump and questions about lending and marketing practices, naming director Lisa Wardell to succeed him at the for-profit education company. The change is effective immediately at the Downers Grove-based firm, which said Hamburger is leaving “to pursue other opportunities.”
Lisa Wardell, 46, most recently executive vice president and chief operating officer of RLJ Companies, has been on DeVry’s board since 2008. According to her RLJ corporate bio, she is an African-American who worked as a senior consultant for Accenture in the late 1990s and directed a team that developed a luxury resort in Liberia that opened in 2009. The bio also said she was involved in the formation of Dallas-based RML, described as the largest minority automotive dealership in the U.S. with $1.3 billion in annual sales.
The move echoes a switch by another Chicago company under federal investigation, United Continental Holdings, which in September replaced CEO Jeff Smisek with board member Oscar Munoz.
Hamburger, 52, joined DeVry in 2002 and became CEO in 2006. He did not return a message left on his cell phone.
Under Hamburger’s 9-year tenure as CEO, DeVry initially prospered along with much of the rest of the for-profit education industry. But over the last five years, as student debt piled up and jobs for graduates disappeared after the financial crisis, DeVry shares lost two-thirds of their value, a mirror image of the two-thirds gain turned in by the S&P 400 Consumer Discretionary Index.
In 2014, DeVry was hit by a Federal Trade Commission inquiry into alleged deceptive advertising practices tied to claims that its grads “report earning 15 percent more than the median” for all bachelor’s degree holders within a year of graduation.
In January, the FTC filed suit, causing DeVry stock to skid 15 percent.
Last year a Brookings Institution report said students at DeVry’s main unit, DeVry University, accumulated more than $8 million in outstanding federal student debt through 2014—the fourth-biggest sum among U.S. colleges and universities. DeVry disputed the findings, contending that loans “most likely” were double-counted by incorporating existing debt of transfer students who enrolled at DeVry.
Bradley Safalow, an Atlanta-based analyst and short-seller of DeVry stock, said Hamburger “grossly overpaid” for U.S. Education Corp. in 2008 and some other acquisitions, and cheapened the DeVry University brand by pursuing “lower-quality students in an effort to sustain break-even profitability.”
Safalow also accused Hamburger of mishandling the FTC inquiry by suggesting it was without merit, “yet at every turn thus far the company has lost its court battles and the suit continues to escalate.” He added, “More than anything, this abrupt departure suggests that something has happened for Mr. Hamburger that we do not yet know about—a scary proposition for investors.”
Jeff Silber, an analyst in New York for BMO Capital Markets, agreed that the timing was surprising, given that DeVry recently reported improved quarterly earnings, suggesting that Hamburger’s strategy “just seems to be paying off now.” He continued, “The fact is, he’s lasted longer than most (CEOs). He’s been seen as one of the better ones. This is a very tough sector.”
Analysts speculated that Wardell’s deal-making background signals acquisitions ahead for DeVry, particularly outside the U.S., where the company through its Caribbean medical schools has generated lots of cash, which is difficult to move home without negative tax consequences. Wardell was credited with a “strategic vision and roadmap for rapid acceleration of DeVry Group’s diversification initiatives” in a statement attributed to DeVry Chairman Chris Begley.
“The board is indebted to Daniel for his 13 years of service to DeVry Group, particularly the past nine years in his role as CEO,” Ron Taylor, co-founder of DeVry and a current board member, said in a statement. “Under his leadership, DeVry Group has transformed from primarily serving undergraduate and business school students in the United States to a global education provider—all while staying true to our mission of serving nontraditional students.”
DeVry shares are off 45 percent over the last 12 months and 21 percent since the beginning of this year. Today, shares were up 60 cents to $20 a share.