The G8 Education Ltd (ASX: GEM) share price is having a very disappointing session.
At one stage today, the ASX All Ords stock was down 14% to 94.2 cents.
The childcare operator's shares have recovered a touch since then but remain down almost 11% at the time of writing.
Why is this ASX All Ords stock sinking?
Investors have been selling G8 Education's shares on Thursday after the company released a trading update and announced the sale of some assets.
In respect to the latter, the company has signed a conditional agreement to sell 31 of its centres to TAK Operations, which is part of the experienced private national childcare provider Genius Education Group.
However, unlike a normal sale, G8 Education is paying TAK Operations to take the assets off its hands.
Under the terms of the agreement, the ASX All Ords stock will make a payment to Genius Education Group, to be allocated across the 31 centres, which combined with transaction costs and adjustments, totals $26.5 million.
This appears to be a sign that management isn't confident that it can turn around the fortunes of these businesses, which are collectively producing a full-year statutory EBIT loss of ~$3 million.
The transaction remains subject to conditions, including landlord consent, transfer of the service approval, and the concurrent completion of certain bundles of centres.
Management notes that obtaining landlord consent to the assignment of each lease from the multiple landlords is not guaranteed and there remains uncertainty regarding completion of all 31 centres proposed to be divested.
Commenting on the sale, G8 CEO and Managing Director, Pejman Okhovat, said:
As part of G8's commitment to optimising our network we continuously review our centres to determine which are meeting our high quality and performance standards, which can be improved and which centres would be better under different ownership. This agreement represents a significant milestone in our portfolio optimisation program and will leave us with a stronger network overall.
A key consideration for G8 was a commitment from Genius Education Group to provide opportunities to our people who will transfer to the new owners. While there is some way to go in the process, we have every confidence that Genius Education Group will provide the ongoing high level of service that the children, families and our team at these centres expect and deserve.
The ASX All Ords stock also released a trading update.
It advised that spot occupancy for the week ending 22 October 2023 was 75.4%, 1.4 percentage points below the same week in 2022 and 2.2 percentage points below the same week in 2019.
Cost management continues to be solid and managed to mitigate occupancy performance. The divestment will have no impact on trading in calendar year 2023 given settlement is no earlier than mid-December.