French infrastructure fund Antin Partners has acquired a stake in nursery giant Babilou after fending off competition from Canadian pension fund OMERS in an auction revealed exclusively by this publication.

Bankers from JP Morgan steering the sale of Babilou, one of Europe’s biggest childcare operators, had been targeting €2 billion – equal to 20-times its forecasted 2020 earnings – but reports suggest the final enterprise value was between €1 billion and €1.5 billion. One report claimed that the final price represented 14-times Babilou’s EBITDA.

In March, when this publication revealed that Antin, a private equity fund that invests in infrastructure companies, was a frontrunner alongside OMERS, a source said that the final price would be “closer to €1.5 billion”. It is highly likely that losses linked to the coronavirus crisis contributed to the price reduction.

According to a translated report by French newspaper Le Figaro, Babilou’s shareholders – the Carle brothers, its founders and co-chairmen, and buyout houses TA Associates and Raise – have retained their interests in the firm. Antin’s “entry takes place without any capital increase or shareholder exit, despite the sale of securities”, according to the report, which adds that Rodolphe and Edouard Carle will continue to lead the company.

Another report by WealthX said that the brothers “left their position of first shareholder of Babilou to Antin”.

The deal highlights the infrastructure-like qualities showcased by scaled education companies such as Babilou, which operates more than 500 nurseries that collectively cater to more than 20,000 children in countries including France, Germany, Belgium, Dubai, Switzerland, India and, most recently, China.

With the ability to generate consistent cash flows coupled with robust revenue visibility, large nursery operators – and other education groups – have in recent years have drawn increasing attention from institutional investors. Rival operator Busy Bees is owned by a Canadian pension fund, for example, while Galileo Global Education, Europe’s largest private university platform, was jointly acquired by a Canadian pension fund and a family office in a deal valued at around €2.3 billion, as reported exclusively by this publication.

Based in France, Antin owns a number of businesses in the energy and environment, telecom and transport sectors, but it also controls Hesley Group and Kisimul, two UK-based operators of schools and homes for children with learning difficulties. These investments are categorised in Antin’s portfolio as “social infrastructure” – and it is likely that the firm’s latest in Babilou will, too.

Babilou’s ownership structure is relatively complex.
 
It is understood that the Carle family’s investment vehicle, the Carle Trust, owns a 60% stake in Babilou.
 
However, the private equity unit of Société Générale and Raise collectively own a 15% stake in the Carle Trust.
 
As a result, the Carle family’s equity ownership in Babilou is diluted, standing at 51%, while Société Générale and Raise control the remaining 9% slice of the Carle Trust’s overall 60% share.
 
According to one source, however, the Carle family has “separately negotiated” 59% of internal voting rights, affording the clan greater influence over decision making than its direct stakeholding would suggest. This is common practice in corporate France.
 
TA Associates acquired a 20% stake in Babilou in April, 2017, for an undisclosed sum.
 
Cobepa first invested in Babilou in September, 2013, and now owns 20% of the business following a string of reinvestments, according to its website.

Date published: 20 August 2020

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