Blackstone buys West’s healthcare group

In the first exit from its debut fund, West Private Equity has sold its interest in Southern Cross Healthcare to the New York-based firm for 3x money.

West Private Equity, the London-based mid-market private equity manager sponsored by German bank West LB, has sold its holding in UK residential healthcare provider Southern Cross Healthcare to the Blackstone Group for £162 million (€237 million; $288 million).

The firm acquired Southern Cross in August 2002 when it backed management in a £84 million buyout. The equity component of that deal totalled £33 million. West's CEO Philip Buscombe confirmed in an interview with PEO that the equity investors had made a return of around three times their original investment.

Commenting on the transaction, Buscombe said: 'Southern Cross is an excellent business in which we invested a lot of money, including two add-on acquisitions. We’re a mid-size firm and the company was getting too large for our fund, so the deal with Blackstone was a win-win situation for both parties.'

The purchase, which according to Buscombe was completed within six weeks, was made by an entity controlled by the $6.45 billion Blackstone Capital Partners IV Merchant Banking Fund LP and affiliated funds.

The sale is West PE’s first realisation from its €400 million debut buyout vehicle, West Private Equity Fund 2000. To date the fund has made six direct investments and 14 add-on acquisitions. Buscombe confirmed that the fund was approximately 80 percent invested at this stage and said that although the firm was not fundraising now, it had plans to do so 'over the next twelve months'.

Blackstone’s acquisition of Southern Cross, the fourth-largest provider of long-term residential and nursing care for the elderly in the UK, is the latest move in a rash of activity in the sector.

Blackstone was beaten to the £750 million acquisition of the Four Seasons nursing home group in July by Allianz Capital Partners. Further consolidation in the sector is likely to occur when care home operator Westminster Health Care is put up for sale later this year by 3i. Westminster is expected to fetch around £450 million.

Blackstone also has experience of the sector in the US. In July, the firm invested alongside Metalmark Capital, formerly Morgan Stanley Capital Partners, in the $1.75 billion recapitalisation of acute care hospital operator Vanguard Health Systems.