Think Childcare Limited

Background

Think Childcare Limited (�Think�) is an ASX listed company. As at 30 December 2019, Think owns c. 72 centres and manages 14 centres. Think partners with third-party incubators to develop and trade-up new centres. In June 2019, Think�s largest incubator partner, Edhod Pty Ltd went into receivership. As a result, this placed significant doubt on Think\'s ability to achieve its growth plans. 333 Capital was engaged by the company to review its strategic options in relation to growing and expanding its portfolio of centres.

Edhod acquisition

In order to secure Think�s future growth, the company considered acquiring the Edhod portfolio, either in its entirety or piecemeal. As the centres are in different lifecycles (i.e. some are already trading and others are yet to be constructed), 333 Capital advised that it was best to choose centres that would add the most value to the Think portfolio. 333 Capital prepared the valuation analysis and assisted Think in submitting an offer to the receivers of Edhod Pty Ltd.

Other acquisitions

In addition to the Edhod portfolio, Think was presented with an opportunity to acquire 7 centres. Based on our analysis, these centres will enhance Think�s value and should be pursued by the company.

Think Childcare Development Limited (�TND�)

Think�s long term strategy is to reduce its reliance on third party incubators by increasing its internal greenfield development. To facilitate this, Think proposed a new incubator strategy through a stapled security structure. Think Childcare Limited will focus on operating mature child care centres. Think Childcare Development Limited will focus on greenfield developments with the intention of selling the centres to Think when it meets certain operating hurdles. The structure is meant to quarantine development and trade-up risk in TND, provides transparency of earnings between operations and development activities, and enables TND to access its own financing without consent from TNK�s lender.

Amendment to debt facilities

TND required initial funding from Think. Lender consent and waivers were required in order for Think to loan funds to TND. 

Outcomes

Lenders consents and waivers were sought, and TND received initial funding from Think. Think successfully negotiated the acquisition of 11 Edhod services and a further 7 centres with delayed settlement until the court and the shareholders approve the scheme for the stapled security structure. Think has established the stapled security structure and can now pursue greenfield developments through TND.