Childcare centre operator G8 Education Ltd (ASX: GEM) wants its rival Affinity Education Group Ltd (ASX: AFJ) in a bad way with the former sweetening its offer and giving the target's shareholders a choice of taking cash or scrip.
G8 Education announced that it is willing to pay 80 cents cash for each Affinity share it doesn't own, which is 8.1% above Affinity's closing price on Friday but a 48.1% premium to the target's share price the day before G8 Education's first approach was announced.
The acquisition hungry G8 Education lobbed an all-scrip takeover bid for Affinity on July 3 as it offered to swap one of its shares for 4.61 shares in Affinity, which would value the deal at 70 cents a share.
This scrip-swap deal is still open to Affinity shareholders, although G8 Education has improved the offer to one-for-4.25 shares, or 80 cents a share based on G8 Education's last closing price.
G8 Education and Affinity are currently in a trading halt and the bidder is showing how serious it is about the offer by announcing that it has secured more than $200 million in additional funds.
Bank of Western Australia is offering a $50 million facility to G8 Education and the company has raised another $S155 million ($155 million) by issuing unlisted and unsecured notes through a Singapore bank.
The cost of the notes is low as the coupon is only 3.5% per annum and there's no way it would have been able to pull off a similar deal here.
G8 Education's sweetened offer and additional funding announcement is probably a preemptive move to discourage a rival bid from emerging as the initial lack of a cash option was a weakness in the transaction.
Shareholders generally prefer to receive cash instead of scrip and another bidder could have crashed G8 Education's party by offering money for the stock.
There's speculation that Arena REIT No 1 (ASX: ARF) may be running a ruler over Affinity, although private equity interests cannot be ruled out either.
G8 Education needs the deal as this represents the easiest way for the group to grow after years of buying single or small networks of independent daycare operators.
It remains to be seen how Affinity's board will respond to the latest offer after it rejected G8 Education's first bid as being "opportunistic", but the probability of G8 Education swallowing Affinity has increased significantly following today's announcements.
But this takeover dance isn't over yet so stay tuned!
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