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Plea to keep ABC centres from predatory buyer
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Plea to keep ABC centres from predatory buyer - 19-November-2009, 16:25

November 20, 2009

THE union representing childcare workers is alarmed that a private equity company bidding for up to 705 ABC childcare centres has described itself as an "opportunistic buyer" that intends to sell the centres within two or three years after extracting a profit.

Bidding for the centres appears to have come down to two main parties, Archer Capital, a leading private equity company with $2 billion under management, and a consortium of charities, including Mission Australia, the Benevolent Society, the Brotherhood of St Laurence and Social Ventures Australia. The final bids are due on Monday.

In a meeting with the Archer Capital partner James Carnegie this week the union was told the firm was "industry agnostic" and did not have a preference for investing in any particular industry.

An assistant secretary with the LHMU, Sue Lines, said she was concerned the firm regarded the centres as a business "to be bought cheap, fattened up and sold off. They are in the business of making money. To have it sold off again in two years would be a bad outcome for families."

Archer Capital has interests in wines, software and pharmaceuticals and acquired Rebel Sport in 2007. It has been involved in waste management and food manufacturing but is new to child care.

Ms Lines said the decision over the control of the centres came down to the banks, which are owed about $1 billion by ABC Learning Centres. The banks are represented by the receivers McGrath Nichol.

The centres spread across Australia comprise 15 per cent of the childcare market and cater for about 73,000 children.

Ms Lines said: "If there were better regulations about who could buy and sell and operate childcare centres, we would not have a private equity company in the running who sees this as a way to make money."

The Federal Government said the sale was a matter for the receivers. Some experts have expressed surprise that a private equity firm would be interested in buying childcare centres, given the low margins involved. However, childcare centres are frequently traded on the market, and private equity firms can sometimes improve and stabilise faltering companies.

Mr Carnegie would not comment to the Herald.

About 70 per cent of Australia's childcare centres are in private hands and run for a profit. But Ms Lines said: "Good luck to them. They are in it for the long haul because they believe in it as a business."

There was a national outcry when it appeared a private equity company would buy Qantas, and the deal did not go ahead, she said.

"If it's not OK for Qantas, it's certainly not OK for child care."

Archer Capital has indicated it will keep the current ABC management team in place. This includes the chief financial officer, Peter Trimble, who previously worked at CSR, as did the Archer managing partner Greg Minton.

Much secrecy surrounds the bid, but it is believed the charities consortium has been working around the clock with the aid of big philanthropists, who are seeking a modest "non-commercial" return on investment, and other financial advisers.

The consortium members are also relatively inexperienced in child care, although Mission Australia bought 29 separate ABC centres in May.

A person associated with the consortium's bid said: "This is not a three-year prospect for us; we're looking at 10 to 15 years, perhaps beyond."
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