Childcare operator G8 Education has increased its takeover offer for rival Affinity Education to include almost $150 million in cash.
But the target has urged its shareholders to resist the new offer for now, while it considers takeover interest from another party.
The rapidly expanding G8 launched its bid for Affinity on July 3, which if successful will add 161 childcare and early learning centres to G8's portfolio, taking it past 620 centres, with places for more than 47,000 children.
G8 originally offered one of its shares for every 4.61 Affinity shares, and that has now been improved to one G8 share for every 4.25 Affinity shares.
A $148 million cash component has also been added, with G8 opening an on-market bid of 80 cents for each of the 185 million Affinity shares it does not already own.
The cash price represents a 48 per cent premium to the value Affinity shares were trading at prior to G8's takeover move in July, G8 said.
Affinity shares have since increased in value, and were up more than 10 per cent on Monday after the company responded to the new cash offer from G8 with news of a possible rival bid.
Affinity said it has recently had discussions with another party about its intentions to make a takeover offer.
The other party has not been named, but Affinity said shareholders should take no action while the company considers its approach.
Affinity shares closed up 8.5 cents at 82.5 cents, while G8 shares were up 10 cents, or 2.94 per cent, at $3.50.
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