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Blackstone, Fajr in deal for GEMS stake

Blackstone Group is close to its first investment in the Middle East as the private-equity firm nears a deal to acquire a minority stake in Dubai’s GEMS Education, three people with knowledge of the matter said.

Blackstone, based in New York, has teamed up with Fajr Capital Ltd. to invest in the world’s biggest privately held schools operator GEMS through its Blackstone Tactical Opportunities unit, the people said, asking not to be identified as the information is private. A formal agreement to buy 20 percent of the company may be reached in the next couple of weeks, two of the people said. The deal may value the stake at about $350 million, they said.

GEMS, which operates more than 100 schools across 14 countries, may sell as much as 25 percent of the company to raise up to $500 million, Chief Operating Officer Dino Sunny Varkey said last year. The company hired Credit Suisse Group AG to help manage the sale, Varkey said. GEMS reported profit of $74.4m for the year ended March 31, in a statement to the Nasdaq Dubai stock exchange in July.

A deal for GEMS would be the first investment for Blackstone in the Middle East. Private-equity firms are stepping up acquisitions in the region as markets improve and companies seek cash for expansion.

KKR & Co. and CVC Capital Partners Ltd. have teamed up to bid for Kuwait Food Co., the operator of KFC and Pizza Hut restaurants in the Middle East and North Africa, people with knowledge of the matter said Aug. 12. Advent International Corp. and TPG Capital Management LP bid separately for the business worth about $4 billion.

Fajr initially teamed up with Bahrain’s Investcorp Bank BSC to buy a minority stake in GEMS, people familiar with the matter said in April. Dubai-based Fajr brought in Blackstone after Investcorp dropped out of talks, two of the people said this week.

Fajr, backed by investors including Malaysian sovereign wealth fund Khazanah Nasional Bhd, led a group of investors to buy Dubai-based oil services company National Petroleum Services in a deal valued at more than $500 million, the company said.

The Abraaj Group Ltd., the Middle East’s biggest private-equity firm, bought 25 percent of GEMS in 2007 and in January 2012 restructured its stake into a three-year convertible loan instrument. GEMS said in October that it repaid the loan to Abraaj last year.

A Dubai-based spokesman for Fajr declined to comment, while a spokeswoman for GEMS did not immediately return an e-mail seeking comment. A representative for Blackstone based in London and Emily Hartman, a spokeswoman for Investcorp, declined to comment.-Bloomberg