Childcare operator Evolve Education's shares soared 11.7% to 67 cents on the New Zealand stock exchange in early morning trading following news it's selling the NZ arm of its preschool business for $46 million.
Evolve Education announced it had entered into a conditional sale to sell its wholly owned subsidiary, Lollipops Educare Holdings, to Australian private equity firm Anchorage Capital Partners for $46m.
The acquisition is planned to go through Shine BidCo, a fund managed by Anchorage.
Lollipops Educare, which operates all of Evolve’s New Zealand-based centres, will run 105 centres if the deal goes ahead.
'Significant strategic realignment'
If the deal doesn't go through, Evolve said the company wouldn't incur financial penalties under the share sale agreement – unless the childcare company enters into discussions with other parties in relation to a similar transaction, in which case Evolve could be required to pay $700,000.
The education provider told the NZ stock exchange (NZX) that the deal was a “significant strategic realignment of its operations”. The transaction was expected to be completed by the end of September.
The rationale for the transaction was largely to “accelerate the execution” of Evolve’s Australian growth by redeploying proceeds to acquire assets in Australia.
But the company said its NZ performance had been severely impacted by the pandemic over the past two and a half years, with closed borders leading to teacher shortages and government-mandated closures having 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 Education said in a statement.
Anchorage is re-entering the childcare business, after previously selling its Australian childcare provider Affinity Education to Sydney-based private equity firm Quadrant Private Equity.
