Private equity house Actis is weighing a London flotation of Honoris United Universities, the pan-African higher education provider, EducationInvestor Global can reveal.

This publication has learnt that Actis is laying foundations internally at Honoris that would help facilitate an initial public offering on the London Stock Exchange.

Earlier this month, Honoris installed a new London-based chief executive, Jonathan Louw, and moved his predecessor Luis Lopez, who lives in Miami and held the role since July 2017, to a non-executive director position.

Louw has experience in listing and leading large companies with operations in African countries.

He spearheaded the IPO of Adcock Ingram, a South African pharmaceutical conglomerate, when it separated from the Johannesburg-listed TigerBrands in 2008 and headed the firm as chief executive until 2014.

Earlier this month, Hichem Omezzine, who spent more than a decade with Actis leading its education portfolio and was an Honoris board member, joined buyout group TPG as a partner. Omezzine stepped back from Honoris in November 2020, according to his LinkedIn profile.

Actis, which has owned a controlling stake in Honoris since its inception in 2017, is also bolstering the company’s corporate governance and enhancing reporting procedures, it is understood. 

An IPO of Honoris, which operates 14 universities across Africa catering to more than 57,000 students, is at present the primary exit route under consideration by Actis, according to a source privy to its thinking.  

However, another source familiar with Actis’ options cautioned that “it’s still very early days” and added that “they haven’t appointed any banks” to underwrite a London listing.

Another source said the prospect of a London IPO has “been a constant rumour for a while now”, but added that “the recent moves”, referring to Louw’s appointment, the fortification of internal processes and Omezzine’s departure, “make it pretty likely”.

A listing of Honoris within the next 12 months would follow a period of robust acquisitive growth. Last year – despite the Covid-19 pandemic – Honoris hoovered up three institutions – in Nigeria, Tunisia and South Africa.

It is unclear whether Actis would pursue a partial or full listing of Honoris’ shares and at what price, meaning a valuation at this point cannot be discerned.

A London IPO is one of several options under contemplation by Actis, which could also look to offload a majority or minority stake in Honoris via a private auction.

Neither a London IPO nor private stake sale is guaranteed.

When contacted by this publication, a spokesperson for Actis said: “Actis is not considering an exit of any kind right now. We are focused on growing the business both organically and through M&A.”

A strategy consultant familiar with Honoris said that, due to the company’s size and market position, it may not be the desire of trade buyers or private equity – and suggested that a public listing would be “logical”.

“If you look at the likes of Galileo and Global University Systems (GUS), they are properly at scale, whereas Honoris is a level below that”, the person said. “It would be hard for a trade buyer to digest, and private equity would probably struggle with the ask in the market and with the total addressable market size.

“A listing would not surprise me.”

According to investment banking sources, GUS had contemplated selling shares on the public market – but opted instead to privately auction a minority stake, as revealed by EducationInvestor Global earlier this month.

One investment banker familiar with GUS’s thinking said that the organisation had reservations around going public after witnessing the experience of university operator Laureate Education on the US stock market. At $13.36, Laureate’s share price is flat on its listing price in February 2017 – despite having aggressively divested assets worth billions of dollars over the past two years – and its market value has fallen by nearly 40% since October.

Meanwhile, a public listing would thrust upon Honoris onerous quarterly reporting requirements.

Several market commentators suggested that stringent reporting obligations could slow the pace at which Honoris is able to expand.

“The quarter-by-quarter nature of public markets and relentless focus on news [that could affect the share price] can make investing very hard to do,” said one consultant.

A former Laureate employee said: “All you end up doing is reporting; it becomes impossible to get anything done. I can’t think of one example of a company operating degree-granting universities that has had a successful run on the public market.

“If you ask me, it’s not a good idea.”

One investment banker questioned whether the London Stock Exchange would be a “natural fit” for Honoris given that, at present, it does not host the shares of any university operators.

“The challenge of [Honoris] listing in London is the absence of comparable peers,” the banker said. “Laureate is not a good benchmark. There’s no reason why a higher education business with good assets can’t thrive on public markets… but it would be next to the likes of Pearson, Wey and Tribal, and could be misunderstood.”

Others struck notes of optimism.

One well-placed source, who is confident that a London IPO will go ahead this year, said: “I think it’s going to go really well. I rate the company very, very highly.”

Last September, Honoris shuffled its senior leadership team, promoting Laura Kakon to chief growth and strategy officer and former Laureate executive Luis Ramirez-Alonso to chief human resource officer, while Pepe Peran joined as chief business development officer.

Based in London, Actis has assets under management exceeding $15 billion and invests in growth markets across Africa, Asia and Latin America.

Date published: 1 February 2021

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