Gachukias cede control of Riara schoolsFriday May 03 2019
The family of Daniel and Eddah Gachukia has ceded control of the Riara Group of Schools to a private equity firm, Actus Equity, which has acquired a 22.32 percent stake in the holding company that runs the family’s six learning institutions.
Actus implemented the deal through its new Kenya-registered subsidiary, Actus Education Holding AB.
Although the value of the transaction was not made public, disclosures from the Competition Authority of Kenya (CAK) show that Actus secured controlling rights in the deal.
This means that the institutional investor now has the final say on the school’s strategy and operations, a privilege usually bestowed on an acquirer after paying a significant premium.
“The Competition Authority of Kenya has approved the proposed acquisition, with controlling rights, of 22.32 per cent of the issued share capital of the Riara Group of Schools Limited by Actus Education Holdings AB,” the regulator said in a statement.
Among the business matters in which Actus will have control are; hiring and firing of management, staff remuneration, capital investments, distribution of dividends and sale of assets.
This means that the PE firm will be actively involved in the running of the schools, giving it control of its investment.
Riara runs six schools in Nairobi, offering both the 8.4.4 and British curriculum.
The schools have annual revenues of more than Sh1 billion but have a market share of less than three per cent in Kenya’s private education market, CAK said.
“Based on the above, the proposed transaction is unlikely to lead to a substantial lessening or prevention of competition in the markets for education based on the British National Curriculum in Kenya and education based on the 8-4-4 Curriculum System in Nairobi,” the regulator noted.
“Additionally, the transaction is unlikely to lead to any negative public interest concerns.”
The transaction highlights the increased deal-making in the private education sector, where founders have implemented special structures in a strategy to take profits and retain residual income.
The family of Mary Okelo, for instance, last year sold its entire stake in Makini Schools to a group of institutional investors for about Sh1.3 billion and retained ownership of the school properties which earn it rental income.
In return, the consortium of ADvTech Ltd, Scholé and Caerus Capital got the rights to manage Makini Schools.
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 revenues of between Sh350 million and Sh1 billion.
This is according to the ranking of top taxpayers by the Kenya Revenue Authority (KRA), with the data offering insight into the growth of private education in the country.
Some 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, including Kilimani Junior Academy, Makini Schools and Juja Preparatory offer the national curriculum, with their popularity rising in the wake of declining 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 run into hundreds of thousands of shillings and in some instances, can top the Sh2 million mark for each boarding high school student.