OMERS Buys a Big Stake in International Schools Partnership
The private equity investment division for the Ontario Municipal Employees’ Retirement System (OMERS) has bought a 25% stake in International Schools Partnership (ISP), a UK-based global network of K-12 private schools, as part of the pension fund’s private market expansion in Europe.
The acquisition from Swiss asset manager Partners Group will value the international school group at about $2.3 billion, OMERS Private Equity said Monday. Partners Group will still hold a majority stake in ISP.
ISP was part of a buy-and-build strategy for Partners Group when it first founded the school network in 2013. The private markets asset manager said it planned to capitalize on consolidation opportunities in the K-12 school market.
Now, the investors are planning to continue expanding ISP’s international network. Since 2014, under the leadership of its chief executive Steve Brown, ISP has added 50 schools across 15 countries. It’s the fifth largest school network for K-12 students overseas.
For OMERS, ISP will be part of its expansion into private equity opportunities across Europe, according to OMERS Head of European Private Equity and Senior Managing Director Jonathan Mussellwhite.
“Over the last 15 years, OMERS Private Equity has successfully executed on a strategy of partnering with top management teams at industry-leading companies to support accelerated growth,” Mussellwhite said in a statement. “ISP is a great fit for this strategy.”
The capital raised from the acquisition will be used to continue expanding ISP, particularly into investments in learning and technology, as well as improvement into physical infrastructure of the schools, and further mergers and acquisitions.
OMERS has $12.3 billion (C$14.8 billion) allocated to private equity, about 14% of the $87 billion (C$105 billion) in total assets OMERS had under management as of December.
Among the UK and Europe-based assets in the OMERS Private Equity portfolio are workforce firm Alexander Mann Solutions, sustainability consultancy firm ERM, and behavioral health care provider Lifeways.
OMERS put out a press release on this deal Monday:
OMERS Private Equity announced today that it has signed an agreement to acquire a 25% stake in International Schools Partnership (“ISP” or the “Company”) from Partners Group. OMERS Private Equity invests on behalf of OMERS, the defined benefit pension plan for municipal employees in the Province of Ontario, Canada. The transaction values ISP at an enterprise value of EUR 1.9 billion.
ISP is a leading group of 50 international schools currently spanning 15 countries and serving around 45,000 students globally through multiple curricular options. Its experienced and ambitious management team, led by Steve Brown, CEO, is committed to expanding ISP’s global network, after having added 50 schools between 2014 and 2020.
Jonathan Mussellwhite, Senior Managing Director and OMERS Head of European Private Equity, said: “Over the last 15 years, OMERS Private Equity has successfully executed on a strategy of partnering with top management teams at industry-leading companies. ISP is a great fit for this strategy, especially given the strength and experience of its leadership team. We are excited by the addition of ISP to our portfolio as we continue to look for opportunities to deploy capital across Europe and build our European Private Equity business.”
Steve Brown, CEO of ISP, said: “We have successfully grown ISP since inception in 2013 with the support of Partners Group. As we focus on extending ISP’s global network further, we are delighted to now have OMERS Private Equity invested alongside us. We look forward to working closely with OMERS experienced and active team. We welcome their long-term approach to value creation, and are confident that with OMERS, together with Partners Group, we will be able to continue delivering exceptional outcomes.”
James Frankish, Director, OMERS Private Equity, said: “Steve Brown and the ISP team, in conjunction with Partners Group, have built ISP into a global leader, and we are excited by the opportunities ahead as we partner to drive continued, accelerated growth.”
David Layton, Co-CEO, Partners Group, says: "ISP is a textbook example of entrepreneurial ownership and transformational investing in action. Having invested extensively in the education sector, we saw the potential to create a leading K-12 schools platform supported by growing global demand for high quality education. We had sufficient conviction to back a great management team and get to work to build a business from the ground up. Today, we are pleased to welcome OMERS as a shareholder to ISP, which is already one of the largest K-12 school groups globally and still has significant growth potential ahead of it."
Weil, Gotshal & Manges LLP acted as legal counsel for OMERS Private Equity. EY served as financial advisor for OMERS Private Equity.
With all the hoopla around CUPE Ontario and OMERS's performance (more on that below), I wanted to take a step back today and discuss a great deal with Partners Group, buying a 25% stake in International Schools Partnership (ISP).
This is private equity at its best. ISP was part of a buy-and-build strategy for Partners Group when it first founded the school network in 2013. The private markets asset manager said it planned to capitalize on consolidation opportunities in the K-12 school market.
Over the past eight years, ISP has become a leading group of 50 international schools currently spanning 15 countries and serving around 45,000 students globally through multiple curricular options. Its experienced and ambitious management team, led by Steve Brown, CEO, is committed to expanding ISP’s global network, after having added 50 schools between 2014 and 2020.
OMERS Private Equity has a strategic partnership with Partners Group, a leading private equity firm, and approached it to buy a stake in ISP.
If you look at the portfolio of companies in OMERS Private Equity, you'll quickly understand how this company fits in perfectly into their portfolio.
It's an investment in the fast-growing education sector where demand is strong and it complements their other portfolio companies.
The transaction values ISM at $2.3 billion which means OMERS is investing a bit more than $500 million to acquire this stake.
The capital raised from the acquisition will be used to continue expanding ISP, particularly into investments in learning and technology, as well as improvement into physical infrastructure of the schools, and further mergers and acquisitions.
OMERS Private Equity will work alongside Partners Group which will still hold a majority stake in ISP to grow this business and scale it into more countries.
Education is a huge business worldwide and the rapid expansion of the sector has been driven by strong demand from families for high-quality, English-medium education – a demand that has in turn been driven by the rapid expansion of the middle class in many emerging markets and an increasingly globalized outlook for students and parents.
All this to say, strong global growth will keep driving the private K-12 sector as more families seek a high-quality, English-medium education.What I like about this sector is that it's fairly recession proof (just like student housing) and fits well in a pension portfolio looking for stable cash flows.
I've noticed OMERS Private Equity has been very busy lately, selling its stake in ERM to KKR and realizing on a few deals.
The group is headed by Michael Graham who is based in New York and they have a London office which is headed by Jonathan Mussellwhite. You can read about all their deals here.
Lastly, I did get some feedback on my last comment on OMERS and CUPE Ontario.
The CUPE Ontario people came at me on Twitter but I stood my ground.
I think the most important points are being lost in all this:
- OMERS had a setback last year, it lost 2.7% as the lockdowns disproportionately impacted its private equity and real estate portfolio. It will bounce back this year, which is something I firmly believe.
- More importantly, it remains fully funded which is the only thing active and retired members really need to worry about.
- I don't like the way this CUPE Ontario report played out in the media and they should have taken it to the board since it is a jointly sponsored plan and held private discussions to voice their concerns.
- Members have a right to raise issues in a responsible manner, not in a public manner stating misleading opinions to make it look like there is a systemic issue (there isn't).
Also, it's not my job to approach Fred Hahn to get his version of the story. I'm not a reporter, I call it like I see it and this looked awful to me from the moment I saw the articles.
My email is public, anyone can reach me, I am biased toward OMERS in this case and openly so because I don't like the way this all played out publicly.
People who know me and my blog well know that I don't shy away from thorny issues and have no problem stating it like it is, even if it doesn't look good for the pensions I cover.
My blog is called "Pension Pulse" not "Pension Pandering" but I am an ardent defender of DB pensions and believe Canada has the best DB pensions in the world.
It pains me to see public sector unions go after them in public without fully understanding the issues at play. It's just plain wrong and stupid.
Alright, let me wrap it up there.
Below, at the International Schools Partnership they want all their children and students to experience amazing learning. Watch some nice promotional clips. This is a great long-term investment for OMERS and its contributors and beneficiaries.
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