Anna Chu, an MBA from Singapore Management University, and new-hire to Temasek Holdings Pte. Ltd., was excited by ANB AMRO's appraisal of ABC Learning Centres Limited (ABC), an Australian business managing childcare centres. Chu had been hired to analyze firms in which Temasek got shares and to report to the fund's service sector portfolio manager. In May 2007, Temasek, Singapore's sovereign-wealth fund, acquired 12% of ABC Learning Centre's equity for $A7.30 per share, or a total purchase price of A$400 million.
If ANB AMRO's appraisal of the inherent value of the shares of ABC proved correct, Temasek's investment would be quite profitable. However, some observers questioned aspects of ABC's business model, particularly its contracting process for raising capital and outsourcing services for the learning centres. By January 2008, ABC Learning Centres Limited had become the biggest operator of private childcare centers in the world, with more than 2,200 centres in Australia, the U.S., U.K., and New Zealand. The intensive growth strategy of cobbling together a world-wide empire of daycare centres of aBC were funded with short term debt. In January 2008, the business announced semiannual gains that were lower than analysts' predictions, sending the stock price of the organization into a tailspin.
PUBLICATION DATE: May 20, 2013 PRODUCT #: TB0331-PDF-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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