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ABC Buys La Petite Academy and Busy Bees.

ABC To Become Second-Largest USA Childcare Provider and Enter UK Market

BRISBANE, Australia -- A.B.C. Learning Centres Limited (ASX: ABS) today announced that it has entered into a definitive agreement to acquire Chicago-based childcare services provider La Petite Academy from an affiliate of JP Morgan Partners, LLC, other investors and management for approximately US$330 million.

As a result of the acquisition, ABC - the world(')s largest publicly traded provider of childcare services - will become the second-largest private childcare provider in the United States, just 11 months after entering the US market. The acquisition will more than double the number of centres that ABC operates in the US. This follows ABC's acquisition of two other US childcare companies, Learning Care Group Inc in January, 2006, and Children(')s Courtyard in August, 2006.

In separate transactions, ABC also announced two other agreements:

* To acquire for UK[pounds sterling]71 million a leading United Kingdom childcare company, Busy Bees Group Ltd. Busy Bees devised and operates an innovative childcare voucher system which ABC believes it can apply in other countries.

* To acquire 49 childcare centres in New Zealand and six in Australia for A$65 million from Macquarie Leisure Services Pty Ltd. These centres will be integrated into ABC's existing operations.

The total cost of the all-cash acquisitions is approximately A$680 million (US$522 million), which ABC will finance with a new debt facility provided through a syndicate consisting of Westpac, the Commonwealth Bank, Bank of America and Goldman Sachs.

ABC said as a result of the acquisitions, management has increased its EBITDA forecast for the period to June 2007 from in excess of A$250 million to in excess of A$273 million. ABC expects the acquisitions to be EPS accretive for the same period.

ABC Learning Centres Chairman Sallyanne Atkinson AO said these acquisitions affirmed ABC's strategy of positioning itself to take advantage of the opportunities presented by the large, but fragmented early childhood sector in the United States, while consolidating its market share in Australian and New Zealand.

ABC Learning Global Chief Executive Officer Eddy Groves said each of these acquisitions makes sense for ABC both strategically and financially.

"We expect these centres to help us extend our record of delivering consistent improvements in our financial performance - while also continuing to improve the range and quality of educational programs we offer to parents and their children on an increasingly global basis," Mr Groves said.

LA PETITE ACADEMY

(")The acquisition of La Petite(')s geographically diversified network of academies represents an important step toward our strategy of building our presence in the large North American market, where we see opportunities to apply our array of industry-leading management and educational practices," Mr Groves said. (")This acquisition moves us closer to our goal of becoming the industry leader in early childhood education and family solutions in the US.(")

Mr Groves said ABC sees significant growth opportunities in the US, where the market for childcare is extremely fragmented, with no company having more than a 2 per cent share of the market. After the acquisition of La Petite, ABC will serve approximately 1 per cent of the US childcare market.

The US market has seen steady growth. According to estimates by MarketData Enterprises, childcare industry revenues in the US have increased at a compounded annual growth rate of 10.7 per cent since 1982. This growth has been fuelled by the entry of mothers into the workplace - since 1990, more than half of mothers have been working - and a steady increase in the numbers of live births in the US.

(")This transaction is about far more than acquiring the second-largest private childcare provider in the US. We will be bringing together educators and academies with strong commitments to providing a quality experience for children and their families. We are tremendously impressed with the quality of the curriculum and staff of La Petite, from infants and toddlers to pre-schoolers and school age children," said Bill Davis, President and CEO of Learning Care Group, Inc., which is ABC's US subsidiary.

Mr Davis said La Petite will continue to operate under its existing name and will fall under the Learning Care Group(')s umbrella of brands.

ABC anticipates a smooth integration of the US operations. ABC expects to replicate its successful integration of the Peppercorn centres in Australia in 2004. The company completed that integration within 12 months of purchase, with the transaction generating significant savings in corporate-office expenses while also strengthening the quality and consistency of centre performance. Purchasing La Petite provides ABC with the opportunity to achieve similar success in the US, the company noted.

With annual revenue in excess of US $400 million, La Petite operates 650 academies in 36 states and has the capacity to serve 97,500 children with an average centre size of 150 places. Following the acquisition of La Petite, ABC will operate 1038 centres in the US with a licensed capacity to care for approximately 156,000 children. The company has delivered substantially improved financial performance in recent years, including approximately 19 per cent compound annual growth in EBITDA over the past 5 years.

ABC intends to seek to retain many of the managers and executives of La Petite as it integrates them into its Learning Care Group.

ABC Management expects the purchase of La Petite for US$330 million to lead to an EBITDA contribution after identifiable synergies of approximately US$45 million in 2008. The benefits of anticipated cost-saving synergies will not be fully realised (on an annualised basis) until financial year 2009.

Closing of the transaction is conditioned on the receipt of regulatory approval and is expected to occur in the first quarter of 2007.

BUSY BEES GROUP LTD

Busy Bees Group Ltd is the 5th largest childcare provider in the UK and operates a network of 35 owned and 12 managed centres, together offering more than 4000 places across the UK. In addition, Busy Bees Vouchers is one of the of the leading childcare voucher providers in the UK.

Mr Groves said the acquisition of Busy Bees will provide ABC with a starting point for further expansion into the fragmented UK market and throughout Europe by way of a well-established company whose committed and experienced management team will remain in place following the acquisition.

"Importantly, this innovative voucher system - where the company supplies tax-efficient childcare vouchers to employers, who offer them to their employees as a benefit in an agreed salary sacrifice program - provides ABC Learning with a new business segment which we believe can be applied across the global childcare market,(") Mr Groves said.

Busy Bees(') vouchers are accepted by all forms of registered childcare providers, including other nurseries, creches and out-of-school clubs. The voucher system has the ability to generate significant cash flow and industry sources anticipate significant growth in coming years.

The purchase of Busy Bees for UK[pounds sterling]71 million is expected to make an EBITDA contribution of UK[pounds sterling]9.5 million in 2008. Busy Bees has a consistent cash balance of UK[pounds sterling]15 million as well as property to the value of UK[pounds sterling]22 million.

The transaction is proposed to settle Monday, December 18, 2006.

PURCHASE FROM MACQUARIE LEISURE SERVICES PTY LTD

The acquisition of 49 centres in New Zealand will see ABC increase its number of NZ centres from 28 to 77 in a total market of 1700 centres. ABC Learning will have 1158 centres as of June 30, 2007 in Australia following this acquisition of six centres or about 20 per cent of the long-day childcare market.

The purchase from Macquarie Leisure Services Pty Ltd for approximately A$65 million is expected to make a combined EBITDA contribution of A$11.7 million in financial year 2008. As part of this transaction, ABC also acquires a pipeline of five centres.

The transaction is proposed to settle late in the first quarter of 2007.

About A.B.C. Learning Centres Limited

For more information visit the ABC website at: www.childcare.com.au.

About Learning Care Group, Inc

For more information on Learning Care Group, please call 0011 1 248-697-9000 or visit www.learningcaregroup.com.
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Publication:Business Wire
Date:Dec 13, 2006
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