Published: October 16, 2014
The Dubai-based investment firm’s chief executive discusses plans for new investee company GEMS Education.
Investment firm Fajr Capital has led a consortium to buy a minority stake in GEMS Education, a UAE-headquartered company that runs more than 50 schools around the world as well as a consulting practice and a charity.
Dubai-based Fajr Capital, shareholders in which include sovereign funds from Abu Dhabi, Brunei and Malaysia, teamed up with Bahraini sovereign fund Mumtalakat and private equity group Blackstone to back GEMS’ operations in the Middle East, North Africa and East Asia.
After announcing the deal, Fajr Capital chief executive Iqbal Khan talked to EMEA Finance editor Tim Burke about the investment and plans to grow GEMS’ business.
EMEA Finance: What makes GEMS an attractive investment for Fajr?
Khan: We love education as a sector and we’ve been looking for opportunities. There are not many large-scale opportunities in the sector which have a proven track record, world-class management, a great pedigree and name, and which could be internationalised into some of our core markets, such as Brunei, Malaysia, Indonesia, Saudi Arabia.
I’ve had the privilege of knowing [GEMS founder] Sunny Varkey for quite some time and hold his family in very high regard. That chemistry and working relationship with Sunny Varkey was very important in the sense that he trusts us.
EMEA Finance: How did you come together with the other members of the investor group?
Khan: We’ve been in discussions with the Varkey Group about their vision for the business and what we could do for them for around four years. We always say we would bring with us a combination of investors that would offer diversity for the group.
We had many choices and were approached by many investors from the region and internationally. We made a choice that we would have one regional investor – we have a very high regard for Mumtalakat and are working with them on a few other opportunities. Then we were looking for an international partner and frankly we could not have been more fortunate than to get a firm like Blackstone.
EMEA Finance: Given the regional and international expertise within the new investors, what are the international opportunities you see ahead for GEMS?
Khan: Our investment is into GEMS Education businesses in the Middle East, North Africa and East Asia. These countries represent very high growth markets and education is a hugely important area for all of them. Take what GEMS has done in Dubai and the UAE, and imagine the opportunities in neighbouring countries like Saudi Arabia, where 25% of the budget for the kingdom this year is for education. It’s a very important focus market for us.
Our goal is firstly to ensure that GEMS continues to do well in its core markets. Then in international markets there’s a prioritisation exercise – low-hanging fruit where we can have a deeper impact. Asia is a very important market – we’re in discussions in Brunei, Malaysia, to see what we can do. Indonesia is a very big market. Saudi marks an immediate market with a big growth opportunity.
EMEA Finance: Where does this deal fit into the development of the regional private equity market?
Khan: This represents a model for partnership between institutional capital and family-owned business. Family owned businesses want to partner but on a basis of mutual trust, respect and also growth. The model of the typical private equity-led, leveraged buyout – change the capital structure, put huge amounts of debt in – is not a model for family-owned businesses. They want partners who will add value.
This deal represents a prototype. I believe similar transactions will happen locally in the UAE but also in the wider GCC and MENA region. This is our fifth transaction in 2014 and we don’t invest only into the capital structure or company – we invest into partnerships, into values, into a vision for the future.