Childcare to float

TIM HUNTER
Last updated 05:00 24/08/2014

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Australian investors are buying up New Zealand childcare businesses with an eye to floating on the NZX.

Evolve Education was set up in May by Greg Kern and Russell Daly of Queensland-based Kern Group in an echo of Australia's Affinity Education Group, which listed on the ASX in December.

It is understood Evolve has agreed to acquire several New Zealand childcare businesses, including Lollipops Educare and Porse.

Lollipops managing director Mark Finlay said he was unable to comment on the deal yet.

"I'm not in a position to talk about that," he said. "There's nothing signed, sealed and delivered. It's conjecture at the moment."

Porse founder Jenny Yule could not be reached for comment.

It is understood Evolve aims to echo Affinity's float, which raised A$75 million to buy 57 childcare centres and list on the ASX. After a public share offer at A$1 a share, Affinity's stock is currently trading around A$1.20.

As well as Kern Group, Evolve's shareholders include Affinity directors Stuart James and Gabriel Giufre.

A source with knowledge of the situation said the potential timetable was to float Evolve before Christmas, although an initial public offer was not the only capital raising plan being considered.

ASB and Goldman Sachs are reportedly advising Evolve on its acquisition of about 85 childcare centres.

Wayne Wright, owner of New Zealand's largest childcare group Kidicorp, said he was aware of Evolve's scheme.

"They asked me if I was for sale, and I'm not. We're a family firm."

The listed market model had been tried before by the likes of ABC Childcare, said Wright.

Australian group ABC expanded into New Zealand in 2003 but collapsed in 2008. Some of its centres were subsequently bought by Kidicorp.

"A public company is about making profits for shareholders. It's not about necessarily making a difference to children," said Wright.

"When they come into the country it'll be the same as ABC, they'll make a lot of owners rich. But as we've seen with foreign owners in the past, they have an unsustainable model."

Wright said Kidicorp's own experience as a listed company between 2003 and 2007 had been revealing. "It's just an impossible situation," he said. "You can't satisfy parents who want to hold fee costs, the teachers who want a raise and the shareholders that want a dividend. That's why I reprivatised it. We just couldn't survive in that scenario."

Wright described Kidicorp as the biggest player in the sector "by a country mile" with about 250 childcare centres.

Lollipops Educare runs about 42 centres. Porse is known primarily for providing in-home childcare.

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- Sunday Star Times

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