The founder of Dubai-based GEMS Education, one of the world’s largest independent school operators, has reportedly held talks to offload some of his majority stake in the firm to raise as much as $200 million.
Sunny Varkey, who launched GEMS in 1959, is in discussions with bankers from Rothschild about finding new investors for the private equity-owned group as the Covid-19 pandemic continues to batter the education sector, according to Bloomberg, which cited people with knowledge of the matter.
But the investment bank has struggled to drum up interest amid concerns about the widespread economic impact of the pandemic, which has weighed on private schools’ revenues as fee-paying parents continue to lose jobs and income, forcing them to re-evaluate their outgoings. According to Bloomberg, whose report did not specify how large a stake might be sold, representatives for GEMS and Rothschild declined to comment.
School operators in the United Arab Emirates and elsewhere anticipate widespread losses in September as a result of reduced student numbers and reimbursements handed to parents who feel they have been short-changed by the online education that has replaced their children’s school life. UNESCO estimates that more than one billion learners have been impacted by closures of education centres enforced by governments worldwide in response to the coronavirus outbreak.
News of Varkey’s exploration of a stake sale comes just days after a petition signed by more than 13,000 parents with children enrolled in GEMS schools piled pressure on the group to cut fees by at least 30% after it was announced that learning would take place online for the remainder of the academic year. GEMS Education, which is part-owned by CVC Capital Partners, has agreed to offer discounts and deferments to families that can prove financial hardship has been induced by the coronavirus.
CVC, Europe’s largest buyout group, last year bought a 30% stake in GEMS from its former minority shareholders including Blackstone Group, Fajr Capital and Bahrain’s sovereign wealth fund. News of the transaction was revealed by this publication. GEMS Education, which is majority-owned by the Varkey Group, was valued in the region of $5 billion last May, at the time of the deal, which was equivalent to 15-times its earnings.
Last summer, GEMS Educuation executives met with banks in London and New York to discuss a refinancing of debt worth some $1.65 billion. In July, the firm raised $900 million through a bond offering.
GEMS Education has a presence in the UK through Bellevue Education, a group of 19 schools, which it acquired in 2018 in a deal reported exclusively by this publication.
GEMS Education is the UAE’s biggest school operator.