KHALEEJ TIMES, Thursday, Jul 11, 2019 | Zul Qaadah 8, 1440
Consortium buys 30% stake in Dubai's Gems Education
A consortium led by CVC Capital Partners has announced acquiring 30 per
cent stake in Dubai-based Gems Education.
Concurrently, Gems Education has launched a refinancing programme which is
expected to include loans and bonds. Both transactions are anticipated to close
by the end of July 2019. More details will be announced in due course.
The transaction sees the successful exit by a consortium led by Fajr Capital Ltd
including Tactical Opportunities funds managed by Blackstone and Bahrain
Mumtalakat Holding Company, which acquired a significant minority stake in Gems
Education in 2014.
Existing minority investor Khazanah Nasional Berhad, a sovereign wealth fund of
Malaysia, which invested in January 2018, will retain its three per cent stake
in Gems Education.
"Gems Education strives to improve every part of the education journey for both
students and parents. Aided by our investors, the last five years have seen
consistent and continued improvements across Gems Education schools, most
significantly with our excellent inspection outcomes, year on year increases in
student examination results, and our safeguarding and inclusion work with
students, schools and parents. We repaid our inaugural Sukuk in November 2018
and are excited to re-engage with the international capital markets, including
securing our inaugural credit ratings, as we launch our refinancing," said Dino
Varkey, CEO, Gems Education.
"Investment by the CVC Funds marks the third time we have successfully
collaborated with global institutional investors. As we approach our 60th
anniversary, we look forward to developing the company further. This is aligned
with our vision of expanding the business into new markets and continuing our
long history of growth. We would like to thank our exceptional team for their
hard work to get us here, especially Riz Ahmed and Jake Barnard and the broader
management team," he said.
Sunny Varkey, Founder, Gems Education, said: "We are grateful to Fajr Capital,
Blackstone, and Mumtalakat for their contributions to the business over the past
five years. Sixty years on from opening our first school, I believe more than
ever that 'whatever the question, education is the answer'. We are excited that
CVC shares our passion for this mission, and our belief in our potential to
continue to enhance quality education in our growing school portfolio."
Jan Reinier Voûte, Partner and Co-Head of CVC Strategic Opportunities, said: "We
are excited to embark on our partnership with Gems Education, the world's
leading education provider by revenue. Gems is a perfect fit for our Strategic
Opportunities strategy which is ideally positioned to support value creation in
long term partnership investments. We look forward to supporting Gems to deliver
their vision of expanding their footprint."
This investment is made from CVC's Strategic Opportunities Platform, which was
established in 2014 in response to growing demand from institutional investors
to be able to invest for the long term in stable, high-quality businesses. Since
the strategy was created, nearly ?4 billion of equity capital has been committed
to seven investments.
Özgür Önder, Managing Director and a member of CVC's Eastern Europe & Middle
East team, said: "We are very excited about CVC Funds' first major investment in
the GCC region, where we see significant growth opportunities. Gems Education is
a world leader in education and we look forward to working with Sunny Varkey and
Dino Varkey and their excellent management team to further enhance and expand
Iqbal Khan, CEO of Fajr Capital, Andrea Valeri, Senior Managing Director of
Blackstone, and Mahmood H. Alkooheji, CEO of Mumtalakat, jointly issued the
following statement: "We invested in Gems Education as a consortium because we
believed in the company's ability to address the substantial and growing demand
for quality education across emerging markets. We are all very pleased with the
progress Gems Education has made since our investment - with the company
building 16 new schools, entering into new markets through organic and inorganic
expansion, strengthening corporate governance, enhancing its capital structure,
and improving overall academic excellence. The sale of our stake in Gems
Education marks the end of a very successful partnership and also highlights the
positive role strategic financial investors can play to help realise the
potential of high-growth businesses in the Middle East. We wish Sunny, Dino, the
Varkey family, CVC, Khazanah, and everyone at Gems Education all the best as the
company continues to advance its mission to put quality education within the
reach of every child."
Gems Education has grown from a single school started by a family of teachers in
1959 to become the world's largest provider of private K-12 education by
revenue. As at 28 February 2019, Gems Education owned and operated 49 schools in
the United Arab Emirates and Qatar. Since Gamma invested in 2014, Gems Education
has invested more than $1 billion in enhancing and expanding its offering.
Concurrently with the CVC Consortium's transaction, Gems Education will assume
ownership of a further 14 private schools in Europe, through the acquisition of
Bellevue Education, a leading school group headquartered in the UK.
Furthermore, Gems Education recently invested in a portfolio of 14 schools in
the Kingdom of Saudi Arabia and four schools in Egypt through joint ventures
with Hassana, the Saudi Arabia Pension Fund, and EFG Hermes respectively.
The Varkey Group, the founding shareholder of Gems Education, will continue to
independently operate schools under the Gems Education and other brands in the
United States, France, India, Singapore, Malaysia, and Sub-Saharan Africa. The
Varkey Family, in combination, will remain as the largest shareholders in Gems
Education once the transaction has completed.
In June 2019, Gems Education announced the purchase of Saudi Arabia's largest
school operator, Ma'arif for Education, along with its joint venture partner,
Hassana Investment Company, the investment arm of Saudi Arabia's General
Organisation for Social Insurance (GOSI). In November 2018, Gems Education
exercised its option under an existing partnership with Egypt's leading private
equity firm and investment bank, EFG Hermes, to acquire a 50 per cent stake in
four schools in Egypt.
The shareholders of Gems Education have been advised by Credit Suisse, Emirates
NBD and Morgan Stanley, as well as JP Morgan and Bank of America Merrill Lynch.
Allen & Overy acted as legal advisor.
The refinancing is being arranged by Goldman Sachs, Credit Suisse, HSBC and
Citigroup and Milbank LLP as to legal advice. Linklaters LLP has provided
legal advice to Gems Education in regard to the refinancing.
CVC was advised by UBS, Goldman Sachs and Freshfields. Fajr Capital, Blackstone,
and Mumtalakat were also advised by Rothschild & Co and Gibson, Dunn & Crutcher LLP.