Cinven wins £1.44bn BUPA hospital auction(3)

UK private healthcare group BUPA has sold its hospital arm to European buyout firm Cinven. The healthcare company exited the business because of regulation which prevented it from expanding its portfolio.

European buyout firm Cinven has won the bidding for private healthcare group BUPA’s hospital portfolio at £1.44 billion (€2.13 billion, $2.85 billion).

The healthcare specialist saw off competition from several buyout firms including Terra Firma and BC Partners who were also interested according to people close to the firms.

The UK newspaper Financial Times said CVC Capital Partners, PAI Partners and The Blackstone Group in partnership with Ramsay Healthcare of Australia had also mulled a bid for the company. Blackstone believed the price was too high, according to the FT last week.
Cinven will acquire 25 hospitals and a treatment centre in Redhill. BUPA hospitals’ revenues this year are forecast to be £457 million, with an EBITDA of £100.2 million. This represents a 9 percent increase on last year, when the group had revenues of £420 million and £92.2 million of earnings. Private medical insurance companies account for over two thirds of the revenues of the business, and it also provides services to the UK health service NHS and self-pay clients.

A Cinven spokesman said: “Our strategy is to accelerate the investment in the business through a buy-and build strategy. We have no immediate plans for a sale and leaseback but we will undertake a review of the business upon completion.”

A Bupa spokesman said: “Competition authorities and the competition rules were stopping the business from growing. Our insurance business and hospital arm were separate markets but the regulator felt differently and you have to live with the world as it is.”

BUPA started the business in the 1970s but it has since had problems growing the business further. An example of this was Bupa’s attempt to buy Community Hospitals at the turn of the millennium, which was stopped by UK competition authorities. Bupa began selling the business two years ago, when it sold nine hospitals to Legal and General Ventures in an £85 million deal in 2005 but it kept back the rest of its portfolio until now.

“When the arm was started it was set up to provide an alternative to the then filthy NHS hospitals. Given recent investment in quality hospitals there is less need for the company to control hospitals and the business will grow faster outside the group’s umbrella,” according to someone close to the company.  Only one in five BUPA clients go to BUPA hospitals, he added.

Cinven has previously invested in French hospital provider Générale de Santé and it combined portfolio company General Healthcare with Amicus in 1997 in the first European billion pound leveraged buyout.

Hospitals have been a lucrative target for buyout firms in the UK. An Apax Partners-led consortium carried out a sale and leaseback strategy last month, on the UK hospitals of its portfolio company Swedish healthcare provider Capio realising £700 million from the sale.