Schools May Have Started, but GEMS Private Equity Investors Are Ringing the Exit Bells

Published September 26th, 2018 - 08:21 GMT
The consortium has held preliminary talks with investors about an outright sale of the more than 20 percent stake after GEMS shelved its plan to list the schools operator in London. (Fajr Capital)
The consortium has held preliminary talks with investors about an outright sale of the more than 20 percent stake after GEMS shelved its plan to list the schools operator in London. (Fajr Capital)

A group of private equity investors, including Fajr Capital, Blackstone and Bahrain’s Mumtalakat, is weighing the sale of their combined stake in the emerging market business of UAE-based GEMS Education, three sources said.

The consortium has held preliminary talks with investors about an outright sale of the more than 20 percent stake after GEMS shelved its plan to list the schools operator in London, which deprived them of an exit in their more than four-year old investment, the sources familiar with the talks said.

The stake is valued at about $1 billion, two of the sources said.

The sources declined to be identified because the sale talks are not public.

Dubai-based Fajr Capital led the consortium’s bid to take a a significant minority stake in GEMS Education’s business in 2014, covering the Middle East, North Africa and East Asia.

The valuation for the deal and the stake size was not disclosed at that time.

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Bahrain Mumtalakat Holding, the investment arm of the Kingdom of Bahrain, and Blackstone were the other partners in the consortium.

A GEMS Education spokesman said in an email that it does not comment on rumours or speculation. Fajr Capital, Blackstone and Mumtalakat also declined comment.

GEMS is majority-owned by UAE-based Varkey Group, which has interests in education, healthcare, construction and facilities management.

The plan to list GEMS in London was shelved after authorities in Dubai unexpectedly decided to freeze tuition fees, meaning the company’s financial forecasts had to be adjusted, Reuters reported in July.

Bankers have estimated GEMS would have garnered a market capitalisation of around $4.5-$5 billion.

According to the latest trading update of GEMS MENASA, whose stake is for sale, it had 120,000 enrolments in 48 schools in the region. It generated revenues of between $1 billion and $1.02 billion in the financial year that ended in August and EBITDA of between $275 million and $285 million.


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