Childcare centre owner Affinity Education Group Ltd (ASX: AFJ) today updated the market on the latest news regarding its potential takeover offers from G8 Education Ltd (ASX: GEM) and private equity business Anchorage Capital. It seems that G8 will miss out on the opportunity to add Affinity Education to its stable of childcare centres – though it should get a nice cash prize as compensation.
Affinity announced this morning that Anchorage had upped its bid to $0.92 cents cash per share, up from the previous bid of $0.89 and significantly better than G8's final cash offer of $0.80.
Anchorage's offer reflects a 15% premium to G8's cash offer, as well as a 17.4% premium to G8's off-market takeover offer, in which shareholders could receive 1 G8 share for every 4.25 Affinity shares. This falls within the 'fair value' range of $0.92-$1.00 previously determined by the Independent Expert, Lonergan Edward & Associates.
But what about G8?
Interestingly enough, G8 management also agrees that the proposal is the best outcome for Affinity shareholders (remembering that G8 already owns approximately 25% of the company) and has agreed to vote in favour of the resolution on several conditions:
- That Anchorage successfully arranges finance to pay for the bid
- That a superior offer does not emerge
- The Independent Board Committee recommends the offer for Affinity Shareholders
- Affinity shareholders do not vote on the scheme before 14 January, 2016
These are fairly standard conditions for a takeover, and with Affinity management recommending investors accept the bid and no other obvious buyers waiting in the wings, it looks highly likely that Affinity will exit the stock exchange.
Current Affinity shareholders should not accept G8's outstanding takeover offers, which will expire on the 28th of September.
G8 Education meanwhile, will enjoy a nice boost to its cash flow this year as a result of the profits it made by buying Affinity shares and selling them at a subsequent higher price – assuming the deal goes ahead.
However, let's not forget that investors who bought Affinity in the Initial Public Offering (IPO) at $1 or at subsequent prices as high as $1.40 have gone backwards in a very real sense. Affinity shares have lost 33% in the past year, and 8% since listing.
