Dubai school takes over Hillcrest for Sh2.6 billion

Private equity firm Fanisi Capital has signed an agreement to sell Hillcrest International Schools to Dubai-based GEMS Education for Sh2.6 billion, marking the latest deal in the high-end private education industry.

Fanisi teamed up with businessman Anthony Wahome to buy Hillcrest out of bankruptcy in 2011, paying Barclays Bank of Kenya, the family of Kenneth Matiba and other creditors a total of Sh1.8 billion.

This indicates that the PE firm and Mr Wahome are set to book a profit of at least Sh800 million from their seven-year investment.

Fanisi owns a 55 per cent stake in the school, with the balance 45 per cent held by Mr Wahome, who also owns the Nairobi-based Rose of Sharon Academy.

“Hillcrest is being sold to GEMS for Sh2.6 billion. The transaction is awaiting approval of regulators,” a source familiar with the transaction told the Business Daily.

The deal comes after a consortium led by PE firm AfricInvest sold Brookhouse School to UK-based PE fund Educas for Sh3.6 billion in 2015, making it one of the biggest transactions in Kenya’s high-end education sector.

The buyout of Hillcrest will help the Dubai chain of schools to expand in the Kenyan market, adding to its Nairobi-based GEMS Cambridge International School.

Institutional investors

The multinational, GEMS Education is owned by a consortium of institutional investors, including Varkey Group and American private equity giant Blackstone Group.

GEMS, which offers primary and high school (K-12) education in the US, Europe, Africa, China and the Middle East, will inherit Hillcrest’s student population of about 1,000.

Hillcrest offers the British curriculum, International General Certificate of Secondary Education (IGCSE) and charges annual fees of up to Sh1 million depending on the year of study and whether the learner is on full board.

GEMS Cambridge International School also runs a similar curriculum and charges annual fees of up to Sh2.3 million.

Hillcrest, which sits on 36.7 acres in Karen, Nairobi, first made a net profit of Sh320 million in 2015 under the ownership of Fanisi and Mr Wahome.

Its acquisition will enable GEMS to expand its market share in the industry where its main competitors include Braeburn, Kenton, Peponi, Banda and Montessori.

Private schools are reaping big from increased spending on education by Kenya’s wealthy and middle class families, with at least 25 institutions having annual revenue of between Sh350 million and Sh1 billion.

The data from the ranking of top taxpayers by the Kenya Revenue Authority (KRA) offers new insight into the growth of private education in the country.

Some of the schools such as St Andrews Turi, International School of Kenya (ISK), Brookhouse and German School offer international curricula, preparing learners for further studies in universities in Western capitals.

Others like Kilimani Junior Academy, Makini Schools and Juja Preparatory offer national curriculum, with their popularity rising after a decline in standards in public schools.

The KRA list shows that the 25 institutions have a combined annual turnover of at least Sh10 billion, indicating the depth of spending on private education.

Annual fees at the schools are in hundreds of thousands of shillings and can top the Sh2 million mark for each boarding high school student.

Private education

Increased demand for private education has attracted more players, including Nova Pioneer and Sabis International School, which is partly owned by Centum Investments.

One of the latest private school brands to open its doors is Crawford International, based in Kiambu’s Tatu City and which is charging annual fees of Sh950,000 for senior high school.

The current and new private school brands are expected to continue benefiting from the growth of the local middle class and expatriates working for multinationals, foreign governments and global institutions like the UN.
Kenya’s rich households and expatriates, including ambassadors and executives, prefer private schools offering international certifications such as the General Certificate of Education (GCE).

The main attraction of the international schools is that they offer students world-class education, preparing them for admissions into universities in the US and Europe.

Their multicultural student population, comprising tens of nationalities, also prepares students for careers in a globalised world.