Fadi Habib

Amanat Holdings aims to build a pan-MENA higher education platform and is actively seeking new investments in the region’s K12 market after exiting its minority stake in one of the United Arab Emirates’ largest for-profit school groups.

In April, Dubai-listed Amanat sold its minority stake in Taaleem, an operator of nine schools in the UAE which cater to some 9,000 students, to Dubai-backed Knowledge Fund for AED350 million (£68 million). Factoring in the impact of Covid-19 on its bottom line in 2020, this price was equal to 13.8-times Taaleem’s annual earnings before interest, tax, depreciation and amortisation. The transaction generated for Amanat a total cash return of AED225 million and represented an internal rate of return (IRR) of 21%.

Now, the healthcare- and education-focused group is on the hunt for controlling stakes in private universities to bolster its higher education portfolio, encompassing Middlesex University Dubai, which it owns outright, and Abu Dhabi University, of which it controls 35%. Both universities are the largest for-profit higher education institutions in their respective emirates.

Amanat is aiming to build a higher education platform with assets spread across the Middle East & North Africa, according to Fadi Habib, head of education investments, whose firm is “actively” considering investment opportunities in the UAE, Saudi Arabia and Egypt.

“We already have the foundations of a strong platform that we can build on,” said Habib.

In October, Amanat terminated an agreement to sell its stake in Middlesex University Dubai to Study World Education in the “best interests” of its shareholders. Habib would not comment further on the cancelled transaction but stressed that “we are very happy with the university and it is a core part of our higher education portfolio”.

Amanat is primarily interested in controlling stakes in providers as it moves away from a strategy that previously involved acquiring minority as well as majority positions in education companies.

The investment group focuses mainly on mid-market deals. Transactions valued at $50-$150 million fall within Amanat’s “sweet spot”, Habib said – however, it can execute smaller bolt-on deals, as well as larger acquisitions with “no hard cap” on value. Amanat has more than AED400 million following its exit from Taaleem on its balance sheet which, in addition to debt, can be tapped for M&A.

Amanat remains bullish on UAE’s schooling market, Habib said, despite the coronavirus crisis, which caused significant distress across the sector and ushered in several school closures and bankruptcies. Amanat foresees a return to 3-4% growth in that market by next year, Habib added, noting that “pockets of strength” remain even in the premium segment, which has drawn scepticism from some market observers who argue it is oversaturated.

“There has indeed been an increase in supply over the past five years. But if you look at the schools rated ‘outstanding’, most are operating at over 90% capacity,” said Habib. “Covid has of course had an impact, but we believe it to be transitory. Excluding unforeseen circumstances, we expect growth to normalise once again for the mid-to-long term starting from next year.”

Amanat owns the property occupied by NLCS Dubai, one of the city’s most expensive private schools, which is an offshoot of the prestigious North London Collegiate School for girls in London, England. Amanat acquired the Dubai property via a sale-and-leaseback deal, designed to generate stable, long-term returns.

While NLCS Dubai is “ramping up very well” following a recent AED32.7 million capital injection from Amanat to fund capacity expansion, the organisation is not actively pursuing additional school property deals, Habib said.

“We are more interested in investing in operating companies than real estate assets,” said Habib.

Amanat, though at its core a traditional private equity investor, has also dabbled in venture capital.

Last October, Amanat made its first-ever venture capital investment when it acquired a minority stake in BEGiN, a US-based ed tech behind the early learning programme HOMER, for AED18.4 million as part of a Series C funding round.

While higher education and K12 are the “two main pillars” of Amanat’s education investment thesis, the company will consider additional investments in fledgling ed tech businesses that offer “diversification” to brick-and-mortar portfolio companies.

“We believe in the technology sector. Technology has reached a level where its practical application has become commonplace,” said Habib. “We do want to be a part of new, disruptive technologies in the education space. Our strategy is to continue looking at opportunities and invest in companies that have proof of concept, a clear path to profitability, and which we can leverage our existing portfolio to grow market share.

“In addition to providing capital, we can help start-ups access the MENA region and platform companies.”

Date published: 17 May 2021

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