TPG has become the latest U.S. private-equity firm to invest in Africa, making its first investment in a chain of private schools in Morocco, to tap into a middle class which is spending more on education.
TPG, led by billionaire David Bonderman, and its partner in Africa, Satya Capital Ltd., under Chairman Mo Ibrahim, will pay 250 million Moroccan dirhams ($25 million) for a minority stake in Ecoles Yassamine, people familiar with the transaction said.
Wall Street Journal reports that Ecoles Yassamine educates 6,000 students in six schools, and plans to build and buy more Moroccan schools before expanding to other countries in Africa. The continent has the highest proportion of young people in the world. Of the 1.16 billion people in Africa, half are children, according to the United Nations.
“We believe we can build a business that is substantially bigger than Ecoles Yassamine is today,” Bill McGlashan, managing partner of TPG Growth, said in an interview. “The sheer demand makes it very compelling.”
Africa’s markets present potentially high rewards given the low yields on offer from investments elsewhere in the world. TPG’s African strategy differs from its closest U.S. rivals. Blackstone Group is focusing on energy and infrastructure while Carlyle Group and KKR & Co. are buying larger African companies.
TPG is investing through its growth fund, which backs young businesses that aim to expand rapidly, such as Californian startups Uber Technologies Inc. and Airbnb Inc.
Africa accounts for a fraction of the money the world’s leading private-equity firms invest. The continent accounted for just 1.47% of the $438 billion of private equity deals in 2014, though last year’s $6 billion of deals was almost triple 2013’s total, according to research group Preqin.
Private investors are increasingly buying into African education including Bill Gatesand Mark Zuckerberg, who invested in Kenya’s Bridge International Academies, which educates more than 100,000 students. London-based private-equity firm Development Partners International LLP last year bought a stake in a private Moroccan university.
“More firms are seeking to capture opportunities presented by the emerging middle class in Africa,” said Robert van Zwieten, Chief Executive of the Washington-based Emerging Markets Private Equity Association. “There is a vast need for social infrastructure in Africa.”