Evolve Education Group - $132m IPO underwritten

14th November 2014

Evolve Education Group - $132m IPO underwritten

The prospectus for an initial public offering (IPO) of fully-paid ordinary shares (Shares) in Evolve Education Group Limited (Evolve Education) has been registered today with the Registrar of Financial Service Providers. This follows a successful fixed price book-build process that was completed overnight, which saw strong demand from New Zealand and Australian institutions and participating brokers. As a result, the $132 million capital raise has been fully allocated and underwritten. An offer at an issue price $1.00 per Share will be made to clients of participating broking firms between 24 November 2014 and 3 December 2014.

The Chair of Evolve Education, Norah Barlow said: “It is pleasing to have such strong investor support and to have secured the funds to make Evolve Education a reality.”

Evolve Education is a new company aiming to become a leading provider of early childhood education (ECE) in New Zealand. The proceeds from the IPO will be used to acquire an initial portfolio of existing businesses in this field, including Lollipops Educare and PORSE – both of which have been providing childcare to New Zealand families for more than 15 years.

30 ECE centres owned and operated by Lollipops Educare will provide the business platform and infrastructure to manage the enlarged business. Evolve Education has contracted to acquire a further 55 ECE Centres from other vendors. The PORSE group of companies owns and operates a home-based ECE business.

Ms Barlow, says the company aspires to be a leading provider of early childhood education in New Zealand. “We believe we can achieve this through high quality education and childcare services – through the curriculum we will teach, the educators we will train and the learning environments we will create".

“The early childhood education sector represents an attractive investment opportunity. Demand for childcare continues to strengthen year-on-year, driven by underlying trends, such as increasing female participation in the work force, rising household income levels and continued Government support".

Alan Wham, Evolve Education’s Chief Executive Officer, said: “Evolve Education is well-positioned to benefit from offering both centre-based and home-based education and childcare, as we will have the capability to offer parents and caregivers the choice about the type of service in which their child will flourish.”

Ms Barlow says Lollipops Educare and PORSE have strong track records in providing childcare in this country and have built up invaluable knowledge and expertise. It is therefore a significant benefit to the company to have the chief executives of both these businesses form part of the Evolve Education management team. Lollipops Educare’s Mark Finlay and the other Lollipops Educare shareholders will also retain a cornerstone shareholding in the company.

“Our board and management team are confident in the Evolve Education business strategy and believe we can successfully execute our plan for growth. We will aim to continue to grow organically by providing childcare services that are enjoyed by children and truly valued by their parents and caregivers. Additionally, the highly fragmented nature of the industry provides scope to increase scale and leverage efficiencies in the business through selective acquisitions.”

Evolve Education’s management team is led by Chief Executive Officer Alan Wham. Mr Wham was CEO of Pharmacybrands Limited between 2003 and 2013 during which time the business was transformed from a small pharmacy services company to an NZX listed company with a market capitalisation of approximately $200 million. Prior to working with Pharmacybrands he spent 15 years in senior executive positions with 3M in New Zealand, the United Kingdom and Australia before returning to New Zealand in 2003.

Evolve Education forecasts revenue in the financial year ending 31 March 2016 to be $136 million – a significant portion of which is Government funding for early childhood education. Net profit after tax is forecast to be $16.6 million for that same year. The prospective financial information included in the prospectus is based on the currently contracted initial portfolio and makes no assumptions with regards to future acquisitions.

The IPO proceeds and bank funding will be used to acquire the initial portfolio and pay expenses relating to acquisition of the initial portfolio and the offer, as well as provide Evolve Education with capacity to support future acquisitions.

The offer is for 132 million shares, at an issue price of $1.00 per share. Evolve Education will have an indicative market capitalisation on listing of $177 million (based on the issue price multiplied by the number of shares on issue on completion of the IPO and the acquisition of Lollipops Educare). The company expects to be majority New Zealand owned on completion of the IPO.

Goldman Sachs New Zealand Limited is the sole bookrunner, arranger and underwriter to the offer. In addition, Goldman Sachs New Zealand Limited and Forsyth Barr Limited are Joint Lead Managers of the offer.

A copy of the prospectus and investment statement is available here.

Key Dates – indicative only

Company description
On completion of the offer and the planned acquisitions Evolve Education will be the owner and operator of 85 Early Childhood Education (ECE) centres operating under various brands including Lollipops Educare, and of home-based ECE businesses (including the PORSE group) that comprise 91 home-based ECE licenses. These operations are located in cities and towns throughout New Zealand.

Evolve Education aims to grow through further acquisitions and by leveraging its combined expertise and scale to provide quality ECE services.

For more information visit www.evolveeducation.co.nz

The offer of fully paid ordinary shares (Shares) in Evolve Education Group Limited (Evolve Education) is made by Evolve Education on the terms and conditions set out in the prospectus dated 14 November 2014 (Prospectus). The Broker Firm Offer is not yet open. It is expected to open for applications on 24 November 2014. Applications for Shares must be made on the application form accompanying the investment statement (Investment Statement) in respect of the Offer. None of the persons referred to above guarantees, or undertakes any liability in respect of, the Shares.

Application has been made to NZX Limited (NZX) for permission to list Evolve Education and to quote the Shares on the NZX Main Board and all of the requirements of NZX relating to that application that can be complied with on or before the date that the Prospectus was registered have been duly complied with. However, NZX accepts no responsibility for any statement in this announcement. The NZX Main Board is a registered market operated by NZX, which is a registered exchange, regulated under the Securities Markets Act 1988. An application will be made to ASX after the Investment Statement and the Prospectus have been lodged with ASIC for Evolve Education to be admitted to the official list of the ASX and for quotation of the Shares on the ASX. The ASX is not a registered market for the purposes of the Securities Markets Act 1988. Quotation is subject to approval by ASX and ASX accepts no responsibility for any statement made in this announcement.

The Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or the securities laws of any state of the United States and may not be offered or sold in the United States or to the account or benefit of a person in the United States. Persons who come into possession of this document should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

The contents of this announcement are not permitted to be made available to persons in any country other than New Zealand and Australia.

ENDS

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