KinderCare Announces Merger Agreement With KKR
Montgomery, Al -- October 3,1996 -- KinderCare Learning
Centers, Inc. (Nasdaq: KCLC), Kohlberg Kravis Roberts & Co. (KKR) and
Oaktree Capital Management LLC (Oaktree) today jointly announced the signing
of a definitive merger agreement providing for the merger of KinderCare
Learning Centers, Inc. with a KKR affiliate. The Board of Directors of
KinderCare will recommend the merger at a KinderCare shareholder's meeting.
The merger agreement provides for KinderCare shareholders
to elect to receive $20.25 in cash for each of their shares or to retain
existing KinderCare common stock. The election to retain stock is subject
to proration so that approximately 93 percent of the oustanding KinderCare
shares are exchanged for cash and approximately 7 percent are retained
by existing shareholders. Oaktree has agreed to elect to retain a sufficient
amount of shares so that every other shareholder that wishes can receive
all cash for its shares. Following the merger, a KKR controlled entity
will own approximately 85 percent of KinderCare and KinderCare's pre-merger
shareholders will own approximately 15 percent.
The total value of the transaction, including equity and
debt, is approximately $600 million. After the merger, KinderCare will
be capitalized with $175 million of equity, of which $148.75 million will
be invested by a KKR affiliate. All of the financing for teh merger is
being arranged by KinderCare, KKR and The Chase Manhattan Corporation.
KinderCare has also secured commitments through Chase for a $300 million
bank debt expansion facility to fund future growth and acquisitions.
TCW Special Credits, Oaktree and certain of their affiliates
who hold in the aggregate approximately 52 percent of the outstanding KinderCare
stock have irrevocably aggreed to vote their shares in favor of the merger.
The merger, which is expected to be consummated not later than January
1997, is subject to customary conditions including the approval of KinderCare
stockholders and the expiration of antitrust regulatory waiting periods.
Dr. Sandra Scarr, Chairman and Chief Executive Officer
of KinderCare, said, "Through the combination of KinderCare's successful
business strategy and KKR's support, we will have the ability to build
upon our leading position in the preschool and child care industry while
continuing to enhance KinderCare's high education and quality standards.
Our new capital structure is conservative, flexible, and designed to fund
expansion, continue innovation, and further our commitment to the highest
standards of cost effective, quality preschool and child care."
"We believe the merger to be in the best interests
of our company and our shareholders," Dr. Scarr added. "During
the past few years the company's focus has been on developing new kinds
of facilities and refining the curriculum. As a resut of these efforts
and our partnership with KKR, we will be well positioned to embark on a
new phase of prudent growth."
Clifton S. Robbins, a General Partner of KKR said, "We
look forward to working with KinderCare's management and employees to further
the Company's position as the nation's preeminent provider of preschool
and child care services. We believe the child care industry is an important
and growing sector of the economy fueled by strong demographic trends.
KKR intends to support the expansions of KinderCare through internal growth
and acquisitions while continuing to promote industry-leading education
and quality standards."
KinderCare is the largest preschool and child care company
in the United States. At the end of the fourth quarter of fiscal 1996,
under the banners of KinderCare Learning Centers, Inc., KinderCare at
Work and Kid's Choice, the company operated 1148 child
centers in 38 states and the United Kingdom with an enrollment of approximately
120,000 full-time and part-time children and employed over 23,000 people.
Children's education programs include: toddler programs Look at Me
and Let Me Do It; preshool programs My Window on the World
and Once Upon a Time... ; and the schoolage program KC Imagination
Highway. The Company was founded in 1969 and is headquartered in Montgomery,
Alabama.
CS First Boston acted as financial advisor for KinderCare,
and Saloman Brothers Inc. acted as financial advisor for KKR, in connection
with the transaction.
Any offering of securities in connection with the merger
will be made only by means of a prospectus.
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