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A Shell-shocked Eddy Groves landed in Los Angeles at the weekend in a last-ditch effort to stave off the banks by trying to find a buyer for his US childcare business, which until recently was touted as the biggest area of future growth for the company.
Mr Groves, who built his ABC Learning childcare empire from just 25 centres seven years ago to more than 2300 today, arrived at Los Angeles airport on Saturday along with advisers Goldman Sachs JBWere and Austock.
Rumours are rife he will try to offload his chain of 1000 childcare centres in the US to the likes of former junk bond king Michael Milken's Knowledge Learning, America's largest childcare provider, in a consortium backed by Middle East sovereign funds, which have been using US private equity companies as a front to buy strategic assets.
Another possible player is Singaporean sovereign wealth fund Temasek Holdings, which first bought its 12 per cent stake in ABC last year at $7.30 a share. Yesterday it revealed it had raised its holding to 14.6 per cent after buying some of Mr Groves's margin-called stock.
If this doesn't work, he will look to sell his 112 childcare centres in Britain. Failing that, there is always Macquarie Group, which would be keen to take ABC's Australian business - at the right price.
The assets need to be sold because the banks that funded the acquisitions are nervous about Mr Groves's management and want their money back. The US division's rapid expansion to 1000 centres, funded largely by debt, amid a slowing economy has caused the company particular financial grief.
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Brokers ABN Amro have valued the Australia-New Zealand business at $1.9 billion, the US division at $1.6 billion and the British division at $295 million.
Mr Groves is under siege. In the past week he has had to put ABC's shares on a trading halt after the stock fell 43 per cent.
The collapse was driven by margin-call-driven sales of directors' holdings, debt concerns and a campaign by hedge funds to short sell the company's stock and buy its convertible notes to trigger an exploding convertible note issue, which would put control of the company into the hands of the funds and the Commonwealth Bank.
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- reprinted from The Australian