G8 SWEETENS BID FOR AFFINITY TO $185M
Written on the 3 August 2015 by Nick Nichols
G8 EDUCATION has ramped up its plans to swallow smaller Gold Coast rival Affinity Education by lifting its offer to 80c a share.
The move has been accompanied by the removal of all conditions to the bid by G8, which had sought 50 per cent minimum acceptances for the offer.
The latest bid values Affinity at $185 million, up from $162 million when the bid for the childcare centre group was valued at 70c a share.
G8 also has armed itself with more than $205 million in additional funding as it waits on shareholder reception to its takeover offer, which will see Affinity shareholders either swap their stock for G8 shares or cash in at 80c a share.
In a replacement bidder's statement, G8 has increased its bid from 4.61 to 4.25 Affinity shares for every G8 share. The scrip offer closes on September 28.
To supplement its cash reserves and shore up its war chest for acquisitions, G8 has raised $155 million through the issue of unlisted, unsecured notes.
It also has secured an extra $50 million in bank debt to pay out a loan for takeover target Affinity Education.
"The new senior debt facility for $50 million ensures G8 Education is able to immediately repay Affinity Education's debt facility with the Commonwealth Bank of Australia in the event that G8 Education is successful in its takeover offer," says G8 managing director Chris Scott (pictured).
The unsecured notes also will be applied to further acquisitions and are part of a $500 million multi-currency debt issue announced by the company in 2014. The unsecured notes are Singapore-dollar denominated.
G8 currently holds 19.89 per cent of Affinity and would qualify for a board position should a full takeover bid fail.
G8 continues to warn that Affinity shareholders risk a fall in share price and liquidity should the takeover offer fail to proceed.
Through its control, G8 says it may seek to delist of Affinity shares from the ASX, meaning that shareholders who do not accept may have an interest in an unlisted public company.
G8 continues to assert that Affinity shareholders will benefit from efficiency and productivity gains through its systems and technology.
G8's head office operations currently account for $455 per licenced childcare place per annum, compared with $1000 for Affinity. G8 says this alone will save Affinity shareholders $6.5 million a year in operating costs.
The merged group will have 673 childcare centres in its portfolio, which it intends to grow though its existing investment strategy of acquisitions at four times EBIT.
Affinity shares last traded at 74c, while G8 last traded at $3.40.
Author: Nick Nichols