AFFINITY Education Group (ASX:AFJ) has tapped shareholders on the shoulder for $75 million to help fund a new round of acquisitions and pay down debt.
The Gold Coast-based childcare centre provider is seeking $52 million from institutional investors and $23 million from retail investors through an entitlement offer priced at $1.18 per share.
The price is at a hefty 12 per cent discount to Affinity's last traded price of $1.34.
However, the impact the new stock issue will have on the company's shares will not be tested until next Tuesday, when they are expected to resume trading following an extended trading halt granted today by the ASX.
Affinity sought the extension in order to allow the institutional offer to "take place in an orderly fashion". The shares were originally due to resume trading tomorrow morning.
Under the fully underwritten offer, eligible shareholders will be entitled to eight new shares in Affinity for every 21 they own. The offer will boost Affinity's shares on issue by 63.8 million to more than 231 million.
The company says some directors and senior management intend taking up the offer.
The funds will be used partly for the $24 million acquisition announced today of nine childcare centres in Sydney, Brisbane and the NSW central coast. Settlement is expected before June 30.
The remainder of the funds raised will be used to reduce debt, while $5.6 million has been assigned to costs associated with the acquisitions and the entitlement offer.
Affinity says it will have an extra $45.4 million to pursue further acquisitions after settlement.
Affinity also says it plans to settle 24 of the previously announced acquisition of 27 centres this quarter. This will pull $62 million from the company's cash and debt reserves, including a $100 million debt facility the company has with the Commonwealth Bank.
The company also says it is in advanced discussions to diversify its bank funding.
The latest acquisitions will boost Affinity's portfolio to 161 childcare centres and 12,350 childcare places. At the end of December, the portfolio stood at 125 centres.
The company is targeting growth of between 20 and 25 per cent in centre numbers each year, and it is currently focused on improving occupancy which stood at 80 per cent across the portfolio in 2014.
That figure remains well below its larger rival G8 Education's (ASX: GEM) occupancy levels over the same period, reported to be closer to 90 per cent.
Affinity says it has had a positive start to 2015 enrolments, although it gives no further detail.
The company, which posted a net loss of $4.1 million in its first full year as a listed company, says the latest acquisitions will be earnings per share accretive.
The company delivered an underlying EBITDA of $17.9 million and an underlying net profit after tax of $11.4 million in the year to December 31.
The company is expecting to announce a maiden dividend this year.
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