Dubai's GEMS eyes global merger worth $2bn

Global Education Management Systems Limited (GEMS), which owns schools in eight countries, is merging its global operations to create a business worth up to $2bn ahead of an overseas initial public offering in 2013, two sources familiar with the matter have said.

An IPO by the UAE education company, which appointed former US president Bill Clinton as honorary chairman of its philanthropic arm in December, is one of the most highly anticipated in the region due to its growth prospects and dominance in the highly profitable private education sector.

GEMS operates popular private schools across the Gulf Arab region, home to a vast number of well-to-do expatriates, as well as in the UK and United States.

"The IPO is likely between May and June next year," said one of the sources, who declined to be identified because the matter is not yet public. "The company is eyeing a listing on an international exchange, including London and New York."

GEMS' chairman and founder, Sunny Varkey, confirmed the company is merging its global operations under one holding but denied plans of an imminent public offering.

"I don't see an IPO in the near future ... not in the next five years at least," he told Reuters.

A GEMS IPO would be a rare event for the region's equity capital markets which have been starved of major deals since the 2008 global financial crisis.

Last week, however, UAE healthcare provider NMC Health unveiled plans to raise up to $250 million by offering an additional 30 percent of its capital in an IPO on the London Stock Exchange.

GEMS, which operates 65 schools worldwide, is integrating its Middle East, North Africa and South Asian operations with those in the UK and the United States, currently run separately, valuing the firm between $1.5bn and $2bn, one of the sources said.

Dubai-based buyout firm Abraaj Capital, which bought a 25-percent stake in GEMS in 2007 for $112m, earlier this year converted its position into an exchangeable loan instrument.

The agreement will give Abraaj new shares in the parent company ahead of an IPO, one of the sources said.

"The stake was bought back by Sunny Varkey to facilitate the merger of the company's worldwide operations ahead of an IPO," that source said.