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Why the G8 Education Ltd share price is surging today

Childcare centre business G8 Education Ltd (ASX: GEM) topped the S&P/ASX 200 gainers leaderboard today after closing 5.5% higher at $2.51 despite it releasing no news to the market.

The Brisbane-based group has grown in the childcare centre space via an acquisitive strategy that used a mix of debt and capital raisings to fund acquisitions and roll them up into the G8 operating model.

The share price  jumped today on the back of reports in The Australian Financial Review that G8 may be a takeover target for any number of players in the Australian private equity industry.

Much of Australia’s childcare centre market has long been dominated by private equity owners who find the industry attractive thanks to its government support and the opportunity to drive cost savings in running the centres for profit.

The G8 share price took a hit last May when it reported that occupancy on a like-for-like basis at its centres was down 2.5% to 3% over the year-to-date 2018 period.

The group’s shares traded as high as $4.71 in 2017 and the big fall in valuation since is another factor that may be perking the interest of private equity groups

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Motley Fool writer Tom Richardson has no interest in G8 Education shares. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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