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29 Aug, 2022 10: 08 PM3 mins to read
Evolve has acquired numerous new childcare centres. Photo / Supplied
Evolve Education Group has a conditional agreement to sell its childcare business Lollipops Educare to a fund managed by Australian private equity investor Anchorage Capital Partners for $46 million less net debt.
The deal involves 105 childcare centres and was announced by the NZX-listed Evolve this morning. It is expected to be completed by the end of September.
It is conditional on approval by Evolve’s shareholders, a release of security approval by the trustee for Evolve’s notes on issue, change of control consents for specific leases, and completion of an internal restructure to ensure all centre-based assets were held by Lollipops Educare Centres.
Other conditions also include the parties not receiving written communication from the Ministry of Education of any materially adverse action about childcare centre licenses, or a materially adverse event likely to have an impact on the reputation of Lollipops or its business.
Evolve said the rationale for the sale was to accelerate its Australian growth strategy by allowing it to redeploy the assets into Australia.
“Over the past two and-a-half years, New Zealand performance has been directly impacted by Government-mandated closures in response to the Covid-19 pandemic, and closed borders have led to teacher shortages, lower immigration levels and a detrimental impact on overall centre occupancy.
“While the board believes occupancy will recover in New Zealand once Covid-19 impacts are reduced, the timing and extent of this is inherently uncertain and largely conditional on factors outside the control of the company.”
Evolve’s board saw substantial opportunities in the Australian market where it had acquired 13 new childcare centres, bringing its total to 24.
Australian centres had strong occupancy growth at 80 per cent and underlying earnings before interest, tax, depreciation and amortisation (Ebitda) doubled from 2020 to 2021.
Its Australian operations contributed over 80 per cent of the group’s underlying Ebitda in its 2021 financial year.
“The board believes that the sale funds from the transaction can be best allocated in the Australian market for a targeted acceleration of the Australian growth strategy.”
This included a focus on prices and utilising current market conditions to acquire more centres and for market consolidation.
“The board believes Anchorage will be a valuable operator of the New Zealand business and will provide the support and resources necessary to ensure our centres continue to provide a safe, secure, and stimulating environment for our children, their families, and our team of dedicated teachers.”
Anchorage has previous experience in childcare investment having owned Affinity Education Group – one of Australia’s largest providers of early education and childcare.
A special shareholders meeting would be held on September 15.