CVC Capital Partners is leading a group to buy about 30 percent of GEMS Education, a private school operator. Financial terms weren’t announced. Sellers include Fajr Capital Ltd, Blackstone and Bahrain Mumtalakat Holding Co BSC. The CVC group was expected to pay $1 billion for the stake, Bloomberg reported in June.
Funds advised by CVC Capital Partners
to lead a consortium to acquire a significant
minority stake in GEMS Education
Dubai, United Arab Emirates: Funds advised by CVC Capital Partners (“CVC Funds”) have led a consortium (the “CVC Consortium”) which has agreed to acquire a significant minority stake in GEMS Education, the world’s largest provider of private K-121 education by revenue.
Upon completion of the transaction, the CVC Consortium will acquire approximately a 30% stake in the company from the existing shareholders. Concurrently, GEMS Education has launched a refinancing programme (expected to include loans and bonds), details of which will be announced in due course. Both transactions are anticipated to close by the end of July 2019.
The transaction sees the successful exit by a consortium led by Fajr Capital Limited including Tactical Opportunities funds managed by Blackstone (“Blackstone”) and Bahrain Mumtalakat Holding Company B.S.C. (“Mumtalakat”), the sovereign wealth fund of the Kingdom of Bahrain, 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 3% stake in GEMS Education.
Dino Varkey, CEO, GEMS Education, said: “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.”
“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.”
Sunny Varkey, Founder, GEMS Education, said: “We are delighted to welcome CVC as our new partners, as we continue our mission of raising the benchmark for quality education and shaping the future of learning for tomorrow. We are also 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 their offering.”
Iqbal Khan, CEO of Fajr Capital, who led an investor group comprising of Fajr Capital, Blackstone, and Mumtalakat to acquire a significant minority stake in GEMS Education in 2014, added: “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 USD 1.0 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 respectively2.
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.
NOTES TO THE EDITOR:
1) K-12 refers to the education of children from kindergarten through to year 12
2) 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.
Advisors: 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.