Bain's arrival puts further pressure on G8

We have been following developments at Childcare operator G8 for some time (VIEW LINK). The arrival of private equity player Bain in the Australian childcare market (as reported by the AFR) puts further pressure on G8. Bain has acquired an operator of high fee “premium” centres and according to press reports (VIEW LINK) has plans to roll the model out nationally. This adds to an already well supplied market and targets the high fee premium market that G8 has made a priority of targeting in the past. G8 has a geared balance sheet and a high degree of operating leverage given the bulk of its running costs are fixed (rent and wages). The groups failure to obtain bank debt may point to deeper issues and we would not be surprised to see them tap the market for further equity.