MindChamps steps up with $41m childcare buy
Key Points
- MindChamps listed on the stock exchange in Singapore in 2017
- G8 Education runs 17 centres in Singapore, where MindChamps is the biggest firm.
- Peritus, which handled the sale, had other offshore and local interest.
Singapore-listed childcare group MindChamps Pre-School has accelerated its expansion plans in Australia with the $41 million acquisition of eight centres owned by The Grove Academy.
MindChamps is the largest player in the Singapore childcare market, where it competes with ASX-listed G8 Education, which operates 17 centres in Singapore along with 500 in Australia.
MindChamps is listed on the stock exchange in Singapore and has paid $41 million for eight centres previously owned by The Grove Academy. Shutterstock
MindChamps already runs 12 centres in Sydney and has been expanding its reach in Dubai, Abu Dhabi, the Philippines, Vietnam and Myanmar. It is also eyeing expansion in China and Malaysia.
The group listed on the stock exchange in Singapore in late 2017.
The purchase of the eight centres in suburban Sydney and surrounding areas from The Grove Academy comes as broader industry conditions begin to improve, after an oversupply of childcare centres was a big drag on the sector in the past 18 months.
The childcare sector is also expected to be a beneficiary from a future Labor Government if Labor leader Bill Shorten wins the federal election.
RBC Capital Markets predicted in late March that an ''occupancy tailwind'' would come from Labor's $1.75 billion proposal to guarantee 15 hours a week of education for three and four-year-olds, in a sector that is still highly fragmented.
It is earmarked to be free for those attending state-run pre-schools, while those attending private childcare centres would gain an extra subsidy. The scheme is scheduled to begin in the 2021 but the logistics of implementation is challenging, with the states in charge of government-run pre-schools and kindergartens.
Analysts also believe that the childcare sector would also be a winner if the Federal Coalition pulls off an unexpected election victory, having brought in a new childcare subsidy system in July last year which benefits more families.
The buyout of the eight centres from The Grove Academy is the second large deal in the past few weeks.
ASX-listed Think Childcare undertook a placement to raise $18 million in late March to acquire four centres in Perth and to bolster its balance sheet as it expands the upmarket Nido brand.
Peter Fanous, the principal of Peritus Childcare Sales, which handled the sale process of the eight Grove Academy centres, said there had been robust demand during a process which had taken nine months to finalise because of the complexities involved.
"We got interest from a lot of offshore groups and local groups,'' Mr Fanous said.
The eight centres are in locations including Mascot in Sydney, and Shellharbour and Albion Park in the Wollongong region.
G8 Education, the second-largest childcare operator in Australia behind not-for-profit group Goodstart Early Learning, is a bellwether for industry conditions. The stock has gained 70 per cent in the past five months, rising from $1.91 in late October to $3.25 now.
G8 runs 500 childcare centres in Australia under a diverse collection of brands including Headstart, Jellybeans, Bambinos and Sandcastles.
The industry is emerging from an oversupply that was at its worse in late 2017 and early 2018, caused by over-zealous private developers building centres on a speculative basis.