ABS a.b.c. learning centres limited

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    Email Print Normal font Large font February 28, 2008 - 7:02PM

    The Australian arm of a US-based investment bank and a Singapore government fund have moved swiftly to consolidate their stakes in besieged childcare provider ABC Learning Centres Ltd.

    The announcements from Lazard Asset Management Pacific Co and the Singapore government's Temasek Holdings Ltd came as ABC was quizzed by the Australian stock exchange over its shock interim profit downgrade this week.

    ABC shares remain in a trading halt as it negotiates with a so far unidentified suitor to sell off parts of its global empire.

    The crisis has caught the attention of the federal government, which provides substantial subsidies to cover the cost of childcare.

    The world's largest listed childcare provider this week reported a 42 per cent fall in first half profit to $37.1 million, triggering a rout of its stock by investors.

    The meltdown of the debt-laden ABC's stock is being scrutinised by Australia's corporate watchdog, the Australian Securities and Investments Commission, and the ASX, which has issued a "please explain" to the childcare company.

    In a series of written questions, the ASX grilled ABC over when it first knew its profit was likely to dip so low and asked why it hadn't revealed that knowledge to the market as required.

    But ABC said it had continuously disclosed the changes to its rapidly expanding empire and the market should not have been surprised by the profit slide.

    ABC also said it had acted quickly the morning after releasing its results when it became aware of rumours - which were wrong - that it had breached its banking convenants.

    Correspondence between the ASX and ABC was released to the market on Thursday.

    The rumours, combined with the disappointing result and possibly fuelled by some strategic short-selling by hedge funds sent ABC shares into a nosedive on Tuesday.

    That, in turn, forced ABC's entrepreneurial founder Eddie Groves, his wife Le Neve and other directors to dispose of the bulk of their stock as they received margin calls.

    Temasek, which bought 12 per cent stake in ABC last May, and Lazard's local arm revealed on Thursday they had taken advantage of the bargain basement prices to increase their holdings on Tuesday.

    Temasek now owns close to 15 per cent, while Lazard has increased its stake to just under 14 per cent.

    "Temasek Holdings can confirm that it has filed a disclosure on the Australian Securities Exchange, increasing its stake in ABC Learning Centres to 14.66 per cent," Temasek said.

    "We remain committed to our investment in ABC Learning Centres. We make our investment decisions based on commercial considerations."

    Temasek has made a series of purchases since last September, including a parcel of eight million shares purchased two days ago on market at $2.14 apiece.

    Mr Groves and three other directors confirmed on Wednesday they were forced to sell a combined 26.9 million shares worth about $52 million from their personal holdings.

    Temasek itself is being touted as a potential bidder for some of the ABC empire.

    Other likely suitors include US private equity firm Bain Capital and local buyout specialists Macquarie Group Ltd.

    Mr Groves had sold around 8.03 million of his holding of 20.2 million shares at $1.851 each, while Le Neve Groves sold 11 million of her 17 million parcel at $1.837 each.

    Director David Ryan sold all his 249,101 shares at $1.895 apiece, and Martin Kemp sold off more than seven million in total of his 10 million shares.

    Mr Kemp, who heads ABC's Australian operations, sold a parcel of two million shares for a comparatively healthy $3.753 each last Friday, just days before the results were announced.

    After staging a partial recovery, ABC shares closed down $1.60, or 42.78 per cent, at $2.14 on Tuesday before it was suspended from trading. Tuesday's closing share price values the company at $1.02 billion.
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