NZ childcare centres back on block as sale falls over

The New Zealand arm remains a good business with annual profits reportedly up 30 per cent. Photo / Richard Robinson

The For Sale sign is up again on the New Zealand arm of childcare business ABC Learning, after six months of negotiations with a potential local buyer came to nothing.

The receivers of ABC have been trying to sell the Kiwi subsidiary since the Australian parent collapsed in late 2008 owing A$1.6 billion.

The 127 New Zealand childcare centres and College of Early Childhood Education were never in receivership.

Receiver Chris Cowan of McGrath Nicol in Sydney said the party they had been in exclusive negotiations with since August had now withdrawn.

The Business Herald understands the bidder was a New Zealand entity.

"We have had some further approaches from parties so we may look to go into another programme of sale," Cowan said.

In Australia almost 700 ABC Learning centres were sold to not-for-profit syndicate GoodStart in December. The receivers had previously closed 81 and sold another 200 to various owners.

The Australian and New Zealand sale processes had been handled separately, with the Australian buyer not interested in operations on this side of the Tasman, Cowan said.

The New Zealand arm remained a good business with annual profits up 30 per cent.

"This is the ironic part of it."

One concern buyers had was over the large number of childcare licences that had been issued in New Zealand in the past couple of years.

Various names have emerged over the months as contenders for ABC.

In June Singapore-based childcare firm Knowledge Universe entered the frame, while Christchurch property developer Hamish Ireland claimed he was the preferred bidder.

The Ireland Group used to operate a chain of childcare centres which it sold to ABC about seven years ago. It subsequently developed new centres for ABC.

Wayne Wright, owner of the rival Kidicorp chain, made an offer for the business early last year which was turned down.

"The receivers have got in my view an unrealistic expectation of its value," he said yesterday. "[Childcare] is not a high margin business and you can't afford to pay the sort of price that's being touted around."

He did not believe a New Zealand operator would be able to finance a deal. He also said operators faced a challenge later in the year when limitations on the Government's 20 free hours' childcare a week programme came off.

At the moment parents can only use up to six hours a day and must pay the balance if they require a full day's care.

From July they will be able to use the hours consecutively.