UPDATE 1-Australia's ABC signs U.S. sale deal, shares soar

(Adds CEO comment, share price reaction)

SYDNEY, April 22 (Reuters) - ABC Learning Centres Ltd ABS.AX, Australia's top childcare operator, said it had finalised the sale of 60 percent of its U.S. business to Morgan Stanley Private Equity (MS.N), cutting debt and sending its stock up 50 percent.

ABC, a high-profile Australian casualty of the credit crisis when its share price collapsed in February on concerns over high debt levels, said the transaction would reduce total net debt by A$485 million ($458 million). The deal valued the whole of the U.S. business at $700 million, it said.

Shares in the operator of 2,300 childcare centres soared as much as 50 percent to A$2.04 on relief that the deal first flagged in early March had been completed. The stock closed up 46 percent at A$1.98, although still well off highs above $7 in May last year.

Founder and Chief Executive Eddy Groves, who sold nearly all his stake in the company to repay loans as directors refinanced about A$1.5 billion worth of debt, said the sale "addresses concerns about the capital required to grow the U.S. business."

ABC will retain $185 million of ordinary equity and $20 million of preferred equity in the U.S. joint venture.

"The transaction represents an excellent opportunity to crystallise the value of the U.S. business and reduce ABC's gearing, while maintaining exposure to the upside potential of the attractive U.S. childcare market," Groves said.

"It also allows the management team to spend more time focusing on the Australian and New Zealand operations," he said.

The $700 million enterprise value is down from the $775 million talked of when the deal was first signalled in early March, a decline ABC said was due to "the deterioration in credit markets since that time".

The sale price implies a multiple of 12.7 times earnings before interest, tax, depreciation and amortisation (EBITDA) of the last twelve months.

After the sale, which is expected to close in 90 days and result in a book loss of around A$280 million, ABC expects a net loss of A$80-89 million in fiscal 2008. Before the transaction the company had expected a net profit of A$161-A$170 million.

Earnings per share net of tax were expected to be a loss of 17 to 19 cents, down from earlier expectations for a profit of 34 to 36 cents a share.

ABC Learning is 14.7 percent owned by Singapore government investment firm Temasek Holdings [TEM.UL].

ABC said Chairman Sallyanne Atkinson will be replaced by David Ryan at the end of May and chief financial officer James Black resigned. (Reporting by Miranda Maxwell)