Temasek acquires stake in Australian childcare group

Temasek Holdings, Singapore government-linked investment company is poised to invest A$401.5 million ($329 million) for a 12 percent stake in Australia-listed ABC Learning Centres via a placement of new shares.

The Australian childcare group which also operates in New Zealand, US and UK is attempting to raise equity and refinance its existing debt to pursue greater growth in the US.

In addition to placing 55 million new shares at A$7.30 a share to a Temasek subsidiary, ABC is planning to issue up to A$600 million worth of subordinated notes to partly repay the group’s existing bank debt, according to a statement.

ABC’s bankers Commonwealth Bank of Australia and Westpac Banking Corporation are also negotiating a new A$1.44 billion multi-option facility to refinance the childcare centre operator’s existing bank facilities.

The new share placement to Temasek, subject to shareholder approval on 5 July, is part of a larger capital management plan aimed at funding “further opportunities in the large and fragmented US childcare market,” ABC said in a filing with the exchange.

ABC was founded in 1988 by Eddy Groves, chief executive officer of global operations, and his wife Le Neve Groves. From 43 centres in June 2001, ABC will own an estimated 2,305 centres six years later.

It has been raising capital almost continually since 2003 after it was listed on the Australian stock exchange in March 2001 with a market capitalization of A$25 million. Its market capitalization has since grown to approximately A$3 billion, according to a prospectus made available 29 May.

ABC remains keen to build its business at home and abroad. Its next target, identified by the prospectus, is Singapore, Temasek’s home territory, where ABC has identified ten childcare centres.

According to Sydney Morning Herald, a local daily, the proposed new share placement to Temasek represents for heavily-indebted and underachieving ABC a “get-out-of-jail free card.”