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G8 EDUCATION (ASX:GEM) has boosted its interest in takeover target Affinity Education group (ASX:AFJ) to 19.89 per cent as it emerges that the childcare centre giant has been working towards a merger for the past three months.
The Varsity Lakes-based G8 now holds more than 46 million shares in Affinity after buying another 8.05 million shares on Friday.
G8 acquired 16 per cent of the company the day before launching its $162 million all-scrip takeover bid for Affinity.
Affinity chairman Stuart James revealed last week that G8 had previously approached Affinity with a buyout proposal in April. That deal was described as a nil premium merger that priced Affinity's shares at $1.10. A second approach on June 24 was priced at 82.5c a share as Affinity's shares continued a downward trend.
The latest offer, priced at 70c a share, comes in the wake of a massive 40 per cent slump in Affinity's share price on Thursday to a low of 49c.
James has described the latest takeover offer as "opportunistic" and he has urged shareholders to take no action. The Affinity board is reviewing the proposal while awaiting the formal bidder's statement from G8, due within three weeks.
Stockbroker Morgans has weighed into the mix by also describing the offer is opportunistic. In a report on Affinity, the broker has suggested shareholders should take a wait-and-see approach.
Morgans analyst Alexandra Clarke says a buyout by G8 was always on the cards, but it was not expected until G8 had at least 10 per cent market share in the childcare sector. It currently stands at 8 per cent.
"In our view, GEM's bid for AFJ is opportunistic given (Thursday's) significant share price move," Clarke says in a report on Affinity Education.
"As we outlined in our initiation, we always thought GEM would provide the exit strategy for AFJ shareholders. However, we had anticipated GEM would wait until it reached 10 per cent market share.
"In our view, shareholders in the near term should remain holders and see how this plays out.
G8 is offering one of its shares for every 4.61 Affinity shares held. The conditional offer is subject to G8 acquiring a minimum 50 per cent shareholding in Affinity and due approvals by the ACCC and the Australian Competition Tribunal.
G8 chair Jenny Hutson describes the offer as "compelling value" for Affinity shareholders.
The Southport-based Affinity has 161 childcare centres in its portfolio, accounting for 12,000 childcare places and 3600 staff. G8 controls more than 34,000 childcare places and is Australia's largest listed childcare centre operator.
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