Childcare operator Affinity Education is in takeover talks with private equity firm Anchorage Capital Partners after rejecting overtures from G8 Education.
Affinity on Monday urged shareholders to reject a $185 million takeover offer from its larger rival G8 Education, saying it was in talks with other suitors.
Within hours, Affinity identified Anchorage as its possible new suitor.
The companies have entered into a heads of agreement that, subject to finalisation of due diligence and shareholder approvals, will result in a $208.3 million deal.
The Anchorage offer is worth 90 cents a share, compared to the cash-and-scrip offer from G8.
G8 originally offered one of its shares for every 4.61 Affinity shares, but in early August improved that offer to one G8 share for every 4.25 Affinity shares.
A $148 million cash component was also added, with G8 opening an on-market bid of 80 cents for each of the 185 million Affinity shares it did not already own.
Affinity released its target statement on Monday, saying directors recommended shareholders reject G8's offer.
"In relation to the G8 offers, your directors unanimously recommend that Affinity shareholders reject both the share offer and the cash offer," Affinity said.
"To reject the G8 offers, do not respond and do nothing in relation to any documents sent to you by G8."
Shares in G8 were 16 cents, or 4.8 per cent, lower at $3.16 by 1419 AEST.
Affinity placed its shares in a trading halt, which was due to be lifted on Monday afternoon. The stock last traded at 81 cents.
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