Shares in troubled childcare centre operator, ABC Learning Centres (ABS) rebounded as much as 28% as they resumed trading this morning, following an announcement that private equity firm Morgan Stanley is to buy a 60% stake.
However, the share price burst proved to be short-lived, as the market digested the details of the transaction and the stock fell to $1.70, a 20% fall from the last traded price.
ABC securities last traded at $2.14 on Tuesday 26 February, down 42.78%, following news last week of a 42% fall in first half profit.
In a statement issued after the close of markets last night, ABC confirmed it had entered into a Memorandum of Understanding with Morgan Stanley Private Equity for the sale of a 60% interest in its US business, implying a total value of US$775 million.
The company said this will result in cash proceeds on completion of about A$750 million with an additional US$30 million payable shortly after.
“At a multiple of 14.1xEBITDA for the proceeding 12 month period ending 31 December 2007, the sale of 60% interest allows us to realise significant value from our US business, retain a material ongoing presence in this important market, and substantially strengthen our capital structure,” chief executive officer Eddy Groves said.
“We continue to believe that the US represents a significant growth and return opportunity for ABC,” he said.
“I am delighted that Morgan Stanley Private Equity will become our strategic partner in the US. Morgan Stanley Private Equity shares our vision for the business and supports the existing management team to deliver it.”
