Terra Firma Capital Partners has paid £825 million (€1 billion; $1.3 billion) for Four Seasons Health Care, the UK’s largest care home provider following the collapse of Southern Cross last year.
The deal represents Terra Firma’s biggest investment since it lost control of iconic music publisher EMI, also last year.
The investment was described as bullish in a report by PERE's sister publication PEI in light of the national backlash towards The Blackstone Group's historic investment in Southern Cross following its collapse.
However, unlike Southern Cross, which underwent a programme of sale and leaseback, Four Seasons owns most of its 445 care homes and 61 specialist care centres, meaning it's less exposed to rental rate changes.
The buyout will be financed using a mixture of equity and debt, Terra Firma said in a statement. The equity component is understood to be around £300 million, with about £525 million of new debt arranged by Goldman Sachs and Barclays.
Four Seasons had been labouring under a substantial debt burden, and confirmed in early April that it was in talks with its owners – including Royal Bank of Scotland – over a debt restructuring.
Guy Hands, Terra Firma’s chairman and chief investment officer, said in a statement: “By investing new equity, Four Seasons’ debt has been very substantially reduced and Terra Firma has brought stability to the company.
“Terra Firma is committed to further investment in the business in order to achieve long-term sustainable growth. Our number one priority is to ensure that Four Seasons delivers consistent high-quality care and peace of mind for residents, service users and their families. Four Seasons, with a stable capital structure and clear ownership, will be able to lead the sector in terms of quality of service,” he added.
Rothschild, Deutsche Bank and Gleacher Shacklock advised Four Seasons on the deal, while Barclays and Goldman advised Terra Firma.