ABS a.b.c. learning centres limited

abc confirms us asset sale

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    http://www.businessspectator.com.au/bs.nsf/Article/ABC-sells-US-assets-to-Morgan-Stanley-CF9H8?OpenDocument

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    ABC confirms US asset sale
    TOP News

    The Spectators

    By a staff reporter with AAP

    Troubled childcare group ABC Learning, struggling under a heavy debt burden, has negotiated a joint venture with Morgan Stanley Private Equity for the sale of a 60 per cent of its US business.

    In a statement to the Australian Securities Exchange, ABC said the transaction will value the US arm at $842 million, or more than 14 times earnings before interest, tax, depreciation and amortization (EBITDA).

    "The sale of a 60 per cent 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", said ABC chief executive Eddy Groves.

    "I am delighted that Morgan Stanley Private Equity will become our strategic partner in the US."

    ABC said it will use the net proceeds from the sale transaction and an issue of convertible notes to partially repay its senior debt. The chid care operator's existing syndicated bank debt is expected to fall by approximately $750 million.

    ABC said the transaction represents an "excellent opportunity to realise significant value in its US business at a highly attractive price."

    "Following these transactions, we will be in a strong financial position. We will be readily able to fund our growth path and, at the same time, maintain a low-risk capital structure."

    Steve Trevor, Co-Head of Morgan Stanley Private Equity also welcomed the deal.

    "We are excited to partner with ABC, a leading player in the early education and child-care space, to facilitate the Learning Care Group's continued growth and profitability."

    ABC said it did not anticipate shareholder approval will be required for the sale transaction, as the US arm is not ABC's main undertaking. Last financial year, the US business contributed less than 20 per cent of the ABC's EBITDA and less than 40 per cent of its revenue.

    ABC said it required the consent of the majority of its lending banks to go ahead with the deal.

    The two parties have agreed to finalise the deal by 24 March, with sign off expected by the end of April.

    Fund manager Ausbil Dexia Ltd's chief executive Paul Xiradis, whose firm sold out of ABC more than a year ago when the price was above $7.00, said a good deal on the US assets would give both investors and Mr Groves' lenders some comfort.

    "The view was that he wouldn't be able to refinance or be in a position to meet some of the covenants of the banks," Mr Xiradis said.

    "But if he has sold part of the business at a reasonable price it certainly relieves the pressure."

    ABC shares will relist on Thursday after trading was halted more than a week ago when the childcare provider received approaches from an unidentified suitor.
 
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