Majority Sale of Montessori Academy to Greentown Education Investment Co.

On March 2019, shareholders of Greentown Education Investment Co. Ltd, a wholly owned subsidiary of HKSE-listed Greentown Service Group Co Ltd, purchased the controlling interest in Montessori Academy. Montessori Academy is a provider of structured early childhood education for pre-school age children in Australia.

The purchase is reported to have represented a consideration of $67,204,190 (subject to adjustment) for a 56% equity interest in the company. The 56% interest in the subject business, at the date of the sale, comprised the following Montessori Academy centres: Alexandria, Auburn, Bankstown, Burwood, Condell Park, Crows Nest, Croydon, Earlwood, Engadine, Glebe, Greenacre, Gymea, Macquarie Park, Narellan, North Parramatta, Oran Park, Parramatta, Penrith, South Turramurra, Strathfield, Sydney, Leichhardt, and Zetland.

The above centres equate to a total of 1,683 places. Having regard to the purchase price and number of places, we note the sale reflected a rate per place of $71,306 (unadjusted).

The sale was subject to clawback and earn-out clauses linked to the cumulative EBITDA of the subject over the next 5 years of trade; the target for the cumulative EBITDA being $91,713,000. This equates to approximately $18,342,600 p.a. unadjusted. Taking the annualised targeted EBITDA, we can deduce a business multiple of approximately 6.54 times earnings. Notably, the initial multiple is likely significantly higher, given four of the existing centres were in a ‘trade-up phase’ with some other centres yet to reach sustainable occupancy/trading levels.

The above transaction is further evidence of portfolio level transactions within the child care segment, in addition to further solidifying the Australian market as an attractive option for overseas investment