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Morgan Stanley Seals Learning Care Deal
Transaction is Morgan Stanley Private Equity's third US investment.
June 26, 2008
Morgan Stanley Private Equity has completed its $700 million acquisition of children’s education provider Learning Care Group, the US subsidiary of A.B.C. Learning Centres.
The New York private equity arm of Morgan Stanley invested $236 million of equity to acquire the Novi, Mich.-based company at a purchase multiple of 10.5 times pro forma Ebitda with $270 million of senior secured credit facilities supplied by Barclays Capital, a source said, that included $55 million of mezzanine financing. According to a Moody’s Investors Service report from late May, the deal was structured with a $50 million earn-out and $177 million in rollover equity, Moody’s said.
The debt package supplied by Barclays, a source said, was comprised of a $175 million term loan, $55 million of subordinated debt and a $40 million revolving credit facility.
Morgan Stanley announced the closing of its 60% stake purchase in the business late Wednesday. It first announced its intention to make the control-oriented investment in Learning Care in April.
Michael Ryder, executive director of Morgan Stanley Private Equity, said the firm plans to work closely with Learning Care’s management team “to continue the company’s strong position in the child education industry.”
Learning Care generated $787 million in trailing 12-month revenues through the end of March from 1,150 schools, both company-owned and franchised, in 37 states. The schools provide education and child care services for children between the ages of six weeks to 12 years under five brand names: The Children’s Courtyard, Childtime Learning Centers, La Petite Academy, Montessori Unlimited and Tutor Time Child Care / Learning Centers.
Moody’s assigned a corporate B2 family rating and stable outlook to the company in late May, noting that the company has relatively high leverage. But, it also said Learning Care is supported by a group of diverse brands and has made operational and margin improvements over the last five years, along with its investments in underperforming assets that have resulted in greater usage of school centers.
The transaction is the third US investment made by Morgan Stanley Private Equity following its December 2007 investment in Tops Markets and May 2007 equity infusion in McKechnie Aerospace.
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