Holidaybreak's £31m cash call to buy schools

The education and travel group Holidaybreak is to raise £31m through a rights issue to snap up collapsed independent private schools and turn them into children's holiday camps.

Holidaybreak, which owns the PGL children's holiday camp, wants to take advantage of the fact that a series of private schools have closed, or are poised to fold, as well-heeled parents hit by the recession are forced to put their kids into state schools.

The company said it will issue four new shares for every existing nine at a price of 153p, a 49 per cent discount to the closing price of 299.75p on 16 June. It will issue 21.7 million shares under the fully underwritten cash call.

Investors gave the move the thumbs up, sending Holidaybreak's shares higher by 20.25p, or 6.8 per cent, to 320p. The group also said it planned to use the proceeds from the cash call to acquire commercial conference centres that have ceased trading. Holidaybreak said that, over the past five years, the market for private education centres had soared by 10 per cent a year, partly because of the reduction in public sector funding of local education centres and the problems of smaller competitors.

Nick Batram, an analyst at KBC Peel Hunt, said: "Raising expansion capital to accelerate development of the educational business looks well timed and could be transformational for the group. A window of opportunity exists to acquire assets at relatively attractive prices, which in turn should cement Holidaybreak's leading market position."

John Coleman, the chairman of Holidaybreak, said: "The successful completion of the rights issue will enable the group to take advantage of attractive investment opportunities for its education businesses." Holidaybreak said it was in "advanced discussions" to acquire a large potential PGL outdoor education centre with good access to London.

Mr Coleman said: "Completion of the rights issue will help the group to pursue its strategy for growth at a time when many of its competitors are constrained from doing so." Holidaybreak has four divisions: education, hotel breaks, adventure travel and camping.

Carl Michel, the group's chief executive, said: "There remains no sign of the group's education division being materially impacted by the recession."