Mayfield to acquire 14 centres and secure greenfield pipeline in deal with Genius Childcare

Mayfield to acquire 14 centres and secure greenfield pipeline in deal with Genius Childcare

by Jason Roberts

October 29, 2021

ASX listed Mayfield Childcare is seeking to acquire fourteen early childhood education and care (ECEC) centres from Melbourne based Genius Childcare for $39.2 million, as well as enter into a five year greenfield incubator partnership aimed at securing future growth for the Group, according to documents seen by The Sector.  

 

The acquisition price consists of an initial sum of $31.2 million payable in a combination of shares (80 per cent) and cash (20 per cent) and a further payment, known as an earnout, of $8.0 million in early 2023 if the acquired centres generate $8.0 million of EBITDA in CY2022.  

 

From a valuation perspective, the initial payment represents a multiple of 3.9x CY2022 EBITDA and, assuming the earn out hurdle is achieved, the total consideration will be 4.9x CY2022 EBITDA. 

 

Mayfield will fund the cash component of the acquisition with capital raised via an institutional placement through which it seeks to raise around $8.0 million, and issue a further $27.2 million shares directly to Genius for the equity component. 

 

Post the deal Genius shareholders will own around 40 per cent of the enlarged business. 

 

Mix of locations broadens Mayfields geographic reach post deal to more than just VIC 

 

Mayfield’s pre-deal network consists of twenty two centres located in and around Melbourne, with the Group historically being a regional focused operator, although it has previously  expressed ambitions to secure acquisition opportunities in a bid to broaden its regional mix.  

 

The Genius deal will see it assume ownership of eight Queensland based centres, five Victorian centres and one centre in South Australia, which will take its overall network to thirty six centres and for the first time give it a multi regional footprint. 

 

Notably, Genius will provide financial, operational, corporate, legal and marketing services from completion of the deal until 31 December 2022, providing time for the Genius team to achieve their $8.0 million EBITDA earnout hurdle and also giving the Mayfield team time to familiarise themselves with the Genius model and how to operate across jurisdictions. 

 

Mayfield also secures future growth through greenfield incubator partnership 

 

As well as securing immediate access to growth opportunities through the acquisition of the fourteen centres, both parties have also struck an incubator partnership through which Genius will identify, develop and trade up centres for sale to Mayfield. 

 

The partnership term is expected to run for five years over which time Mayfield has the option to acquire centres that meet predetermined performance metrics such as 75 per cent occupancy for three consecutive months and annualised EBITDA of greater than $150,000.

 

The acquisition price will be 4.25x annualised EBITDA. 

 

Mayfield will provide Genius with a detailed brief of their new centre requirements in each region with an annual development plan agreed between both parties setting out the pipeline of centres under development and potential transfer dates. 

 

An extraordinary general meeting (EGM) will be held on 6 December 2021 to approve the acquisition and offer with the transaction expected to complete on 9 December 2021. 

 

To learn more about Mayfield Childcare please click here, and to learn more about Genius Childcare please click here

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