AFFINITY Education (ASX:AFJ) has rushed to private equity to fend off an unwanted takeover offer from larger rival G8 Education (ASX:GEM), hoping that a 90c-a-share bid will do the trick.
The proposed cash offer, which is still subject to due diligence, trumps G8's existing offer of 80c cash or an equivalent share swap that will give Affinity shareholders a chance of riding G8's earnings future.
Anchorage Capital Partners, a private equity group that specialises in corporate turnarounds, has been revealed by Affinity as the preferred bidder for the company's shares.
The Sydney-based firm is best known for its $20 million buyout of Dick Smith from Woolworths (ASX:WOW) in 2012 and the subsequent $520 million float of the business in 2013.
However, the Affinity announcement comes as G8 reveals it is making ground with Affinity shareholders despite the Affinity board urging them to do nothing while it undertakes discussions with other parties for a potential rival bid.
G8 has lifted its holding in Affinity from 19.9 per cent to 24.48 per cent as an extra 10.6 million shares were snapped up through the existing offer.
More acceptances by G8 will make Affinity's task of opting for the new bid that much more difficult as any offer by Anchorage will be subject to shareholder approval.
In its target statement issued today, Affinity describes G8's offer as neither fair nor reasonable.
It says the offer does not reflect Affinity's long-term value, and has come at an opportunistic time when the company's shares have slumped to their lowest level on record.
However, the $208 million Anchorage bid is still subject to due diligence which is expected to be completed by September 21.
Affinity says that should a better offer not emerge by then, it will be backing the sale of Affinity shares to a new entity created by Anchorage.
The big negative for long-term Affinity shareholders, however, is that the 90c offer is still below Affinity's issue price of $1 a share and the deal delivers no further upside than the 10c premium on G8's offer.
Affinity, which had indicated it was talking to a number of parties to secure an alternative to G8's proposal, says it has entered a period of exclusivity with Anchorage until September 21.
"Subject to the execution of binding transaction documents in relation to the proposed transaction, and no superior proposal emerging, your directors intend to unanimously recommend that shareholders approve the proposed transaction in the absence of a superior proposal," says the company in a statement.
G8 has already said its offer, which closes on September 28, is final and will not be increased.
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