European private equity firm Cinven is buying USP Hospitales, an independent healthcare operator, from Spanish rival Mercapital for €675 million (£462 million), including €480 million of debt.
USP is the second largest provider to the private healthcare insurance market, operating 33 facilities, including 13 hospitals, one imaging centre and 16 outpatient centres with over 1,300 beds and over 2,000 physicians under contract.
Simon Rowlands, a partner at Cinven, said: “The Iberian [healthcare] market enjoys much higher growth rates than anywhere in Europe. Spain has had high population growth in recent years driven by immigration from North Africa, creating a huge pressure on the domestic public health service. A number of Spaniards are turning away, because of waiting lists and quality perceptions.”
He said the pressure would continue for some years. There is also an opportunity to consolidate aggressively a fragmented market.
“There is already another €150 million of facilities committed to draw down for acquisitions and Cinven itself will be ready with equity for transformative deals.”
These would have to be a third of the size of the USP transaction or larger to require additional equity, according to Rowlands.
Cinven is backing USP’s existing management team, led by Gabriel Masfurroll, who built the business through a succession of acquisitions and developments to become a national operator. USP recently acquired a 25 percent stake in HPP, the fourth largest player in the Portuguese market, majority owned by Caixa Geral.
Cinven will also continue the investment in organic growth, focussing on specialist areas, especially at the flagship Dexeus unit in Barcelona which opens later this month.
It is a markedly different strategy from that Cinven is pursuing with its investment in UK independent hospital operator BUPA, which it bought last month for €2.13 billion. Rowlands said: “It is also a growth story but more focused on introducing new product areas, such as pathology, radiology and others. There are no plans to merge the two in a cross-border deal, though there is clearly an opportunity to share best practices.”
Cinven developed its interest in the independent hospitals sector as a result of its investments in Générale de Santé, a private acute care hospital provider in France, and General Healthcare Group. Cinven combined General Healthcare with Amicus in 1997 in what was Europe’s first £1 billion leveraged buyout to create a market leader in the UK private healthcare sector.
Cinven exited this investment in 2000.
Cinven also currently owns Partnerships in Care, a UK provider of specialist mental health and related services which operates 940 beds in its 17 facilities around the UK. The buyout firm has expanded PiC’s portfolio by over 40 percent in two years and moved into new markets.
UBS acted as financial advisor to USP’s management team on the transaction.