G8 Education keen for another look at Affinity

10 May 2018, Written by Nick Nichols

G8 Education keen for another look at Affinity

CHILDCARE operator G8 Education (ASX:GEM) may be keen for a second bite at Affinity Education more than two years after botching a takeover of its former Gold Coast-based rival.

Private equity group Anchorage Capital Partners has placed Affinity on the market after successfully fending off G8 Education in an acrimonious battle for the group at the end of 2015.

Under its stewardship, Anchorage says it has improved the performance of the then struggling Affinity portfolio which comprises more than 160 childcare centres.

With an asking price upwards of $600 million for the business, the price for Australia's third-largest childcare operator could be a bit rich for G8 Education which had offered $185 million for the company in 2015.

The reported asking price follows a well-worn path for Anchorage which is headed by Daniel Wong.

Wong was appointed the chairman of Affinity as part of the turnaround team following the takeover by Anchorage.

He was also responsible for Anchorage's turnaround strategy of the now failed Dick Smith. Anchorage acquired Dick Smith from Woolworths for $20 million in 2012 and a year later floated the electronics retailer on the ASX for $520 million. It collapsed with debts of $400 million just two years after floating.

According to media reports, G8 Education's chief executive Gary Carroll says he is willing to look over the sale offer by Anchorage when Affinity is officially placed on the market.
He is reported to have told The Australian that the quality of the assets would be a prime consideration for G8 if any sale should proceed.

However, the company's depressed share price could put the brakes on an acquisition as G8 will likely need to raise capital for any acquisition.

Business News Australia has contacted Mr Carroll for further comment.

The Gold Coast-based G8 currently has a portfolio of 495 childcare centres across Australia and a further 21 in Singapore. It has earmarked the acquisition of another 41 centres over the next two years.

An oversupply of childcare centres has impacted the childcare sector broadly and this was largely responsible for G8 posting a steady net profit of $80.5 million in calendar 2017.

Meanwhile, the fallout from G8's failed takeover of Affinity had its sequel last month when former chair Jenny Hutson was charged by ASIC with multiple offences relating to her connection with companies that had acquired a significant stake in Affinity.

Hutson, who resigned as chair in 2015 following pressure from the G8 board, is facing charges of dishonesty, misconduct, perverting the course of justice, giving false and misleading information and dishonestly failing to exercise her powers and discharge her duties as a director.

The current board has distanced itself from the former chair's actions, releasing a statement confirming that G8 Education itself is not subject to any investigation relating to these matters.

G8's shares last traded a $2.44, down about 46 per cent from its recent highs reached in November last year.

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Business News Australia

Author: Nick Nichols





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