Will Varkey Group’s GEMS schools tie-up with Whittle School bring results
Last week Dubai-based Varkey Group and New York-based Whittle School & Studios said they plan to merge seven of their schools. If approved by the two boards, the merged entity will be called the Varkey-Whittle Education Group. The merger, assuming the deal gets done, “will bring new resources to help upgrade our school facilities” a spokesman for the Varkey Group told the Wall Street Journal.
Both Varkey, founded by Sunny Varkey (in photo), and Whittle run for-profit schools. GEMS World Academy in Chicago and the Hillcrest School in Nairobi will be among the five Varkey schools that are expected to combine with Whittle’s schools in Washington D.C. and Brooklyn, New York City.
Whittle, founded by 73-year-old Chris Whittle, faces lawsuits from contractors alleging they have not been paid millions of dollars. Whittle has put up his home in East Hampton, Long Island, for sale for $95 million - down from an original $140 million. The sale is partly to pay off $5.8 million in personal debt he owes Avenues Global Holdings, his previous for-profit school venture, according to news reports. Earlier he founded Edison Schools, also a for-profit business, and was the publisher of Esquire magazine.
Varkey’s GEMS Education schools has 19,000 students worldwide, and offer British, Indian, American and International Baccalaureate curricula. The GEMS site does not list the total number of schools it operates worldwide. It says it runs 44 schools in the United Arab Emirates (UAE) and Qatar, including eight in Dubai; 16 in the United Kingdom; four in Cairo, Egypt; four in India, in Kochi, Karnal and two in Gurugram; and schools in Africa and Asia. The company says it is the largest employer of British and Indian teachers outside those countries.
Some of the GEMS schools are among the leading English language private schools in the UAE. Historically the region had very few good English language schools, similar to the non-profits run by Christian church-related groups in India and other former British colonies.
Apparently Varkey viewed the GEMS school in Chicago as a way to enter and grow in the U.S. Started in 2014, the school offers an International Baccalaureate curriculum and has facilities that include a planetarium, media center, fitness gym, a 25-meter swimming pool and a 500-seat auditorium.
It reportedly has about 440 students in grades Kindergarten to 12, and a parent pays an annual total of about $33,000 in tuition and other fees per child. Given the roughly $15 million in estimated annual revenues, the teacher and staff salaries, maintenance and other costs, it appears that GEMS may be losing money on its Chicago school on an operational basis. Also, it may be losing more money on the school as an ongoing business since it cost $160 million to set up the school.
Parents, who spend large sums on private schooling, expect the schools to vastly improve their children’s chances of being admitted to the top colleges. Varkey’s GEMS school in Chicago does not disclose college placement information about its recent high school graduates. Instead, the school site links to GEMS schools global site which states, “In the last four years…Our students have been accepted into 1050 universities in 53 countries…(including) 66 of world's top 100 universities.”
In Chicago, as in all major U.S. cities, there are several long established, reputed private schools run by Church-related entities and other non-profit foundations. The quality of graduates from these day schools, as well as from several good residential boarding private schools in the U.S., is well known to the admissions staff of the top U.S. colleges.
In addition, the alumni of the schools, who attended the top colleges, actively track the number of students admitted each year by the colleges. They also collect donations for the college, while simultaneously lobbying its officisls and admissions staff to admit the same or larger number of students from their high schools.
Perhaps Varkey expects that merging the GEMS Chicago school with the two Whittle Schools will enhance its reputation and college placement in the U.S., increase capacity utilization, lift revenues, bring in profits and lead to setting up more schools in the U.S.
GEMS has an estimated $2.8 billion in debt, according to Moodys, the debt rating firm. Last October, while stating that the outlook was stable, Moody’s downgraded the rating on the GEMS’ debt.
In 2019, Blackstone, a major U.S. funds group, Bahrain's Mumtalakat Holding and other investors sold their 30% stake in GEMS to CVC, a U.K. private equity firm. CVC did not disclose the price it paid. The Varkey family is the largest shareholder of GEMS.
In 2018, when GEMS was planning to list on the London Stock Exchange, the 30% stake held by Blackstone and the other funds was reportedly valued at $1 billion. The public listing was shelved after Dubai froze the fees that private schools could charge, Reuters reported.
Sunny Varkey, 63 years old and founder of the Varkey group, was born in Pathanamthitta district, Kerala, India. In 1959, his parents, Mariamma and K.S. Varkey, emigrated from Kerala to Dubai. They started coaching Arabs in English for a fee of 25 Indian Rupees per month, $0.33 at current exchange rates. In 1968, the “Varkey’s School” as the locals called it, was formally set up as Our Own English High School.
After finishing high school in India and the U.K., Sunny Varkey worked at Standard Chartered Bank in Dubai. In 1978, not wanting to retire as a bank manager with little wealth, he quit and started the Chicago Maintenance Company to perform various maintenance services. He used the word “Chicago,” he told the Gulf News, because the western name “would make it easier to attract European expats." In 1982, Varkey became part owner of the Dubai Plaza Hotel, now the Rydges Plaza Hotel, and invested in six other companies as well.
In the early 1980’s, Varkey began managing his parents’ school after they promised not to interfere with how he ran it. He grew the business into the GEMS Education schools and now has an estimated net worth of $1.4 billion, according to Forbes.
Varkey is one of only nine Indian billionaires, around the globe, to sign the Giving Pledge. Established by Warren Buffett and Bill Gates, signatories pledge they will donate at least half their wealth to philanthropy.
While he perhaps did not live up to his parents expectations as a student, finishing only high school, Varkey believes “education is key to fixing so many of the world's greatest problems: violence, poverty and health.”
His family’s “underlying philosophy remains that good giving 'pinches', meaning that the sacrifice you make, has to be felt, else, the act remains just another financial transaction in our lives.”
His Varkey Foundation, set up with his wife Sherly, seeks “to change lives through education around the world.” So far, it has trained 46,000 teachers in 3,000 schools around the world, reaching more than 1.6 million children. Each year the foundation, based in the United Kingdom and with offices in Latin America, awards a $1 million Global Teacher Prize. “Everyone deserves a great teacher,“ says Varkey.
Ranjitsinh Disale, the 2020 winner, pledged half of his $1 million prize to the other nine finalists. He plans to use the remaining to help students in war-afflicted countries. Disale, a primary school teacher in Paritewadi, Maharashtra, India, has been educating girls from local tribal communities. He learns and then translates learning materials into their native language Kannada. He has also set up online tools to remotely educate other teachers as well as students.
In 2006, Sunny Varkey and Chris Whittle sought to create a global private school system. The venture collapsed after the 2008 financial crisis. In 2013, Varkey sued Whittle over repayment of debt and won a $6.3 million judgment. Whittle re-paid Varkey after a delay, when Varkey’s lawyers reportedly sought to put a lien on Whittle’s East Hampton house. Varkey and Whittle are planning to create a global school system again.
“I don't regret my (business) decision, whether it is right or wrong,” Varkey told the Gulf News. “A businessman must accept gains and losses with equanimity."