Think Childcare Ltd (ASX: TNK) has announced that it is going to acquire four new childcare centres. The acquisitions are being bought from third party vendors and its incubator partner at a multiple of four times earnings before interest, tax, depreciation and amortisation (EBITDA) after payroll tax.
These acquisitions will be fully funded by the proceeds from the capital raising. The remaining funds will be used for working capital and balance sheet purposes.
The projection of 12-month EBITDA for these centres is $1.42 million and the total initial purchase price (excluding earn-outs) will be $5.677 million. This will add 386 licensed places and the average occupancy at these centres is 75.5%.
The capital raising will be a non-underwritten institutional placement of approximately five million shares to raise around $10 million from professional and sophisticated investors. The shares issued will represent approximately 11.8% of Think Childcare’s issued share capital prior to the offer.
Think Childcare said that the offer price for the capital raising is $1.99, which is a discount of 5.2% to yesterday’s closing price.
On the face of it the acquisitions seem like decent purchases and will add to Think Childcare’s scale and profit.
However, it seems a bit unfair to the average retail investor that they won’t be given an option to take part in this capital raising and that it’s being done at a discount to the share price.
I could understand if some smaller shareholders are a little annoyed.
Management re-affirmed that the projected calendar year (CY) revenue will be around $88.5 million, projected CY18 EBITDA will be $14.2 million and CY18 net profit after tax (NPAT) will be $8.1 million.