Eddie Groves’s booming childcare company ABC Learning Centres is rumoured to be taking over yet another competitor – this time the prey is the 101-centre strong Kids Campus.
It was less than two years ago that ABC, in a company-altering move, completed a dual merger with its then two biggest rivals – Child Care Centres Australia and Peppercorn Management Group – which resulted in ABC growing from around 320 centres to more than 740 owned or under management in one swoop.
Those acquisitions drew the interest of the ACCC. In fact, the ACCC concluded that “the proposed merger would be likely to substantially lessen competition in several regional areas” and that the merger would lead to the potential for the merged entity to unilaterally exercise market power – that is, raise prices.” But for all its tough talk the ACCC allowed the mergers to progress virtually as intended, merely requiring the enlarged entity to sell off around 60 centres in certain areas.
While ABC ostensibly got away with the Peppercorn and CDC mergers relatively unscathed, surely the ACCC won’t be so lenient with its latest proposed acquisition. If ABC gobbles up Kids Campus, that would leave ABC and Hutchinson’s Child Care Services as the only large-scale commercial operations in the childcare industry.
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Since acquiring CDC and Peppercorn, ABC has hardly kept a low profile. In a detailed piece in the SMH last Saturday on Groves’s burgeoning empire, Ben Hills noted that:
“[in an] Australian Bureau of Statistics survey, the cost of child care rose 10%, and is up 62% in the past four years. Some Sydney centres are charging $100 a day. In a bid to forestall this, when he announced a backdating of the tax rebate in December 2004, the Treasurer, Peter Costello, warned operators not to exploit the subsidy by increasing fees. Six months later, ABC substantially increased its charges.”
There’s no doubt that Groves is a shrewd political and commercial operator. But under Graeme Samuel, the ACCC has shown it can take a tough stance, as evidenced by the intervention in the Toll/Patrick takeover. While ABC may have successfully run the gauntlet once before, it could be in for a tougher fight this time.