Azerbaijan’s State Oil Fund to invest $100M in one of world’s largest private education providers

The State Oil Fund of Azerbaijan (SOFAZ) will invest $100 million in GEMS Education, a Dubai-based family business founded by Indian immigrants who turned a single school into one of the world’s largest private education providers, Report informs referring to SOFAZ.

In addition to SOFAZ, other investors include a consortium led by the Canadian investment company Brookfield Asset Management Ltd., as well as Dubai-based Gulf Islamic Investments, Marathon Asset Management.

The total value of the deal will be $2 billion. That would make the transaction one of the largest private equity deals in a closely held business in the Gulf.

“The move will allow CVC Capital Partners to substantially exit its GEMS stake, five years after it bought into the firm in a deal that marked its first private equity foray in the Gulf. It remains ‘fully committed to investing further in this attractive region’,” said Ozgur Onder, head of CVC Middle East.

The deal is expected to close in the third quarter, subject to conditions. For Brookfield, the transaction marks the latest investment in a region where it has increasingly become active. It recently bought a stake in GII’s logistics unit and sold part of Dubai’s largest office tower to investors from Saudi Arabia and Abu Dhabi.

Separately, GEMS secured funds from a group of Emirati banks to finance the transaction, including for the repayment of the firms’ existing arrangements.

The group’s roots date back to 1959 when founder Sunny Varkey’s parents moved to Dubai from Kerala in southern India.

Today, more than 135,000 students are enrolled at over 40 GEMS schools in the United Arab Emirates. Its expansion over the years has mirrored Dubai’s own growth into a major financial hub. Parents in the city, which has a large expat population that boomed in the aftermath of the pandemic, spend large amounts on private education — sometimes upwards of $20,000 a year.

The transaction brings to an end a sale process that began in 2022. Before that, Varkey tried to sell part of his stake in 2020 but failed to draw buyers as the pandemic spread. The firm also pursued a London initial public offering but those plans didn’t materialize.

“The investment in GEMS marks a milestone for Brookfield and our private equity business in the Middle East, underscoring our commitment to investing in this high-growth region and the strength of our local partnerships,” said Jad Ellawn, Managing Partner and Regional Head of Brookfield in the Middle East.

GEMS Education was advised by deNovo Partners — a Dubai-based boutique founded by former Morgan Stanley banker May Nasrallah — and Goldman Sachs Group Inc.

The State Oil Fund of Azerbaijan was created by decree of the president of Azerbaijan dated December 29, 1999, and is an extra-budgetary state institution accountable to the head of state. The fund accumulates income from the implementation of oil contracts, in particular, from the sale of profitable oil and gas of the state, transit tariffs for the transportation of oil and gas across the country, the lease of state property, and others. SOFAZ assets as of April 1, 2024, amounted to almost $57.373 billion.