Both groups say they have reluctantly decided not to go ahead, blaming a delay in receiving a decision from the Inland Revenue, which they say is damaging the value of both businesses.
The merger of the two companies to form the Nursery Years Group was announced in July when contracts were exchanged, subject to technical issues. It was due to complete by 1 September.
If it had gone ahead the new company would have been the UK and Ireland's largest nursery chain, with 10,336 places and 151 settings (Nursery Chains, 4 November 2004). Asquith and Kidsunlimited would have continued to trade under their respective brands.
The decision to call off the merger puts Asquith in second position in the Nursery Chains league table of the 20 largest nursery groups, with 105 settings and 6,106 places. Kidsunlimited is in sixth place with 4,230 places and 46 nurseries (see the revised table below). Nord Anglia remains the clear market leader, with 9,833 places.
A statement released by Kids- unlimited said, 'The proposed merger will now not complete. The deal involved a highly complex re-structuring, and the process to achieve all of the required tax clearances proved to be commercially unviable.'
The deal had involved complicated financial restructuring. Asquith Court had also 'demerged' its freehold properties of 20 independent day schools and on-site nurseries into a sister company owned by West Private Equity which is managed separately.
Phil Rhodes, chief executive of Asquith Court, said that the companies had decided to put a halt to the deal because of the uncertainty for staff and because its was 'too commercially damaging' for the business.
The delay was preventing integration of the two businesses, he said, and preventing them from recruiting and appointing staff to run the combined company.
Mr Rhodes confirmed that the nursery division would continue to be managed separately.
He said, 'It's disappointing. We're not holding any hope out.'
Asquith Court and Kidsunlimited employees were told that the deal was off last Tuesday (2 November).
A spokesman for the Inland Revenue said, 'If two companies want to merge, that is for the companies to decide upon. However, if they agree to merge, this will consequently impact their tax position, which will need to change to reflect the new status.'
