One of the world’s largest international school operators is drawing up plans for a 2022 initial public offering that could value the company in excess of €3.5 billion, EducationInvestor Global can reveal.
This publication has learnt that Nadim Nsouli, founder, chairman and chief executive of Inspired Education, has appointed Goldman Sachs and Morgan Stanley as joint global coordinators of an Amsterdam flotation, pencilled in for the first quarter of next year.
Inspired, which owns more than 70 premium private schools across five continents, could raise up to €1 billion through an IPO, after which around 30% of the company would be owned by public investors, a source familiar with the plans said on the condition of anonymity.
Citigroup and Bank of America Merrill Lynch have been appointed as joint bookrunners and a third bank will be mandated in due course, it is understood. Inspired is being advised by law firm Clifford Chance.
A close ally of Nsouli told this publication that the executive is pursuing an IPO with intentions to orchestrate a merger with rival school operator Nord Anglia – excluding its China operations – funded with shares and proceeds generated from the listing. Nord Anglia has been majority owned by Baring Private Equity Asia for the past 13 years.
“In Nadim’s mind, a merger with Nord is one of the main motivators behind an IPO as opposed to a private sale,” the ally said. “His view is that these guys [Baring PE Asia] are coming close to having to consider their exit options. He is seriously interested in buying Nord and that would be a lot easier to do if Inspired was a publicly listed company, as it could offer Nord’s shareholders different ways to exit or remain invested.”
The source noted that, following an IPO of Inspired, a takeover of Nord Anglia could be funded “mostly” with shares, which would see both companies’ sponsors become shareholders in a publicly listed company formed by a merger of both assets.
However, Nsouli does not wish for Inspired to acquire Nord Anglia’s China operation, which at present encompasses 15 schools, the ally added, noting that Nsouli believes this entity could be carved out and floated in Hong Kong or China.
Amsterdam’s stock exchange is an attractive listing venue in the eyes of Nsouli because its rules around corporate governance afford founders enhanced control over key decisions such as M&A, which has been the bedrock of Inspired’s buy-and-build strategy over the past eight years.
An IPO of Inspired would mark a unique occurrence in the international schooling sector, in which the only operator – excluding China-based groups – to have listed its shares publicly was Nord Anglia in 2014, before it was taken private again in 2017. Inspired’s other main competitors – including Cognita, ISP, GEMS Education and GlobeEducate – are privately owned by buyout groups, family offices and pension funds.
A public listing at a €3.5 billion valuation would cement Inspired’s position as one of the world’s biggest and most valuable international school operators, which was born just eight years ago out of Educas, an investment vehicle established by Nsouli.
Nsouli owns a minority stake in Inspired, while the majority of the company is collectively owned by private equity giants TA Associates and Warburg Pincus, and Singaporean sovereign wealth fund GIC, which invested €350 million in the group in April 2020, when it was valued at €3.05 billion. This transaction was revealed exclusively by EducationInvestor Global.
The valuation that Inspired is targeting for its IPO is at a significant discount to the enterprise value it could achieve in a private sale, in which forward-looking financial projections and run-rate adjustments for greenfield projects could be leveraged to achieve a higher price.
A source close to Nsouli’s thinking told this publication that Inspired would seek a €4.5 billion valuation in a private transaction. This figure would be based on Inspired’s annual earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ending August 2023, when they are forecast to exceed €200 million.
News of Inspired’s plans to IPO in less than 12 months will likely prompt takeover interest from infrastructure funds, pension funds, sovereign wealth funds, family offices and bulge-bracket private equity houses, which could attempt to pre-empt the listing with off-market bids.
An IPO is one of many routes to liquidity accessible to Inspired – but it is not free of risk.
A stock market listing would thrust upon Inspired more stringent corporate governance and quarterly reporting requirements, while exposing the company to public scrutiny of its financials and executives’ salaries – sensitive subjects in the context of fee-charging education. In addition, Inspired’s market capitalisation would be determined by its share price, which is subject to fluctuation – especially against the backdrop of the coronavirus crisis.
Nord Anglia lasted just three years on the New York Stock Exchange. In April 2017, Nord Anglia was pulled from New York’s primary bourse in a take-private deal orchestrated by Canada Pension Plan Investment Board and Baring Private Equity Asia, the latter of which had owned a majority stake in the organisation since 2008.
In recent months, Inspired has been bulking up via a series of takeovers and greenfield projects ahead of its planned flotation next year.
Most recently, in April, Inspired tabled a bid to acquire AIM-listed online schooling provider Wey Education. A decision on the acquisition, which would value Wey at more than £70 million, is expected this month.
Earlier in April, Inspired bought online tutoring platform Ostaz, which was founded in Nsouli’s home country of Lebanon but is now based in the United Arab Emirates.
Both companies would complement Inspired’s online schooling platform, King’s College Online, launched last year in response to a rising demand for virtual education spurred by the Covid-19 pandemic.
Inspired has also announced plans to build four new schools in Egypt with domestic developer Palm Hills Developments, as well as a school in the Bahamas and another in Portugal.
In January, the company acquired two international schools – one in Vietnam and another in Spain.
Inspired educates more than 50,000 students worldwide.
Nsouli declined to comment when contacted by this publication.
Bank of America Merrill Lynch, Citigroup, Clifford Chance, Goldman Sachs and Morgan Stanley could not be immediately reached for comment at the time of publication.
Date published: 10 May 2021