Affinity Education fields approaches from prospective buyers

Demand at some childcare centres is rebounding strongly after a pandemic-fuelled lapse.

Childcare operator Affinity Education is understood to have fielded acquisition proposals from industry rivals in recent weeks, fuelling speculation that its private equity owners may soon place the business back up for sale.

Affinity was on the market in 2018, but the sale was suspended when offers fell short of expectations by owner Anchorage Capital.

However conditions in the childcare industry are now said to be booming for some companies.

While buyers are believed to be keen to snap up Affinity Education, the understanding is that its private equity owners are eager to retain the childcare provider in the short term as it continues to increase in value.

Unpredictable conditions surrounding the childcare industry also creates difficulties presenting reliable future earnings estimates for prospective buyers.

When Affinity Education was for sale last time around, the company was generating about $30m of earnings before interest, tax, depreciation and amortisation.

Owners had hoped to achieve a price of up to $700m for the business.

G8 Education, which has had a performance challenges of late, is said to have been a keen buyer, but is not thought to be in a position to embark on a transaction.

Recent approaches are understood to have come from privately held childcare operators rather than listed groups such as G8 or Think Childcare, which is currently at the centre of a takeover battle between Australian private equity firm Alceon and Busy Bees Early Learning.

Busy Bees is owned by Canadian pension fund Ontario Teachers and is advised by Rothschild.

Think, with a $127m market value, is advised by Moelis.

Alceon has amassed a 19.23 per cent stake in Think during the Christmas period after its initial bid last year was trumped by one by Ontario.

Alceon later matched the offer, only for Busy Bees, which put a $2.10 bid on the table.

When Affinity Education was for sale last time around, Luminis Partners was running the sales process for Anchorage.

Groups that lined up included Bain Capital, which owns the childcare business Only About Children, along with Partners Group, while Kohlberg Kravis Roberts was thought to be around the hoop.

Affinity, based in Brisbane, owns at least 150 centres throughout Australia.

The approaches come as Anchorage Capital is said to be taking a back seat in the sales process for the Toll Express business despite making in through to the second round of the competition.

Other groups that have looked have included Allegro Funds Management and Oaktree Capital Management, which retreated from the contest almost two weeks ago after it was understood to have submitted a first round offer late last year.