Blackstone signs £564m nursing home deal

Nursing Home Properties, the UK nursing home chain, has agreed to a £563.5m offer from Blackstone Group, the US private equity firm.

Blackstone Group has underlined the attraction of nursing home chains for private equity firms by agreeing the £563.5 million (€807 million; $1.1 billion) takeover of London-listed Nursing Home Properties (NHP).

With 355 care homes and 17,400 beds, NHP is one the UK’s largest owners of private care beds. Highfield Care, the operating business of NHP, and the UK’s fourth-largest care home operator, manages 165 NHP-owned homes (with 7,850 beds) and a further 20 third-party homes (with more than 1,000 beds). The group has been listed on the London Stock Exchange since 1995.

Following the completion of the deal, Blackstone will merge Highfield Care with Southern Cross, the rival UK nursing home operator acquired by Blackstone from West Private Equity for £160 million in September 2004. “We intend to capitalise on the scale and breadth of the enlarged Southern Cross / Highfield Care business to continue to improve the quality of care to our residents and to offer increasingly more services to local authorities and the NHS,” said Blackstone principal Joseph Baratta.

NHP was financially restructured four years ago after running into trouble as a buyer of nursing homes that leased them back to operators. Since having become an operator in its own right under a new management team, it has seen a 14-fold increase in its share price over the last four years, and an 83.4 percent increase in the last 12 months.

The UK nursing home sector has attracted private equity interest because of its high cash generation, growth opportunities resulting from an ageing population and the prospect of consolidation. There are around 500,000 nursing home beds in the UK, where the top ten groups control less than 20 percent of the market.

Such features have led to a number of high-profile deals this year. In July, Alchemy Partners was reported to have reaped four times its original investment from the £775 million sale of Four Seasons Healthcare to Allianz Capital Partners. Then in September, 3i posted a reported 80 percent IRR from the £525 million sale of Westminster Healthcare to Irish horseracing magnates JP McManus and John Magnier.

Blackstone was advised on the NHP deal by Deutsche Bank and UBS Investment Bank. NHP received financial advice from Rothschild, and employed Collins Stewart as broker.