3i checks out of Care Principles after 10 years

UK buyouts and VC powerhouse 3i has ended its 10 year investment in Care Principles, a British care provider for adults with behavioural problems, by selling the Suffolk-based business for £270m to The Delta Fund, an investment vehicle of the Qatar government.

The exit has generated a 3.9x return, with an IRR of 61%, and brings to an end a story which began in 1997 when a team of managers from General Healthcare, the UK private healthcare group, approached 3i with a proposal for building and running medium secure hospitals.

3i liked the idea and paid £1.5m for a 38% stake, and the Care Principles now employs over 1,500 staff and last year reported a turnover of £66m. In 2005 3i backed an MBO when the company founders decided to sell their stake, and former MD of General Healthcare’s BMI Healthcare, was installed as CEO. Nick Irens, former Chairman of Westminster Healthcare took the post as Chairman.

The change in ownership was quickly followed by the acquisition of Ermine Care, a provider of community-based specialist services for adults, operating three open hospitals and a care home with nursing, as well as a domiciliary supported living service.

The company now has over 380 occupied beds and provides assessment, treatment, care and rehabilitation for adults requiring long-term therapy and treatment for learning disabilities and mental health problems. The majority of patients are sectioned under the Mental Health Act and receive rehabilitation through a combination of nurses and carers with a typical staff to patient ratio of four to one. The average length of stay at a home for an individual is approximately four years.

3i has a strong track record in the healthcare services sector, most notably with investments in Westminster Healthcare, the nursing home operator, Castlebeck, Caretech and Milbury (Paragon), other healthcare providers for adults with learning difficulties.

The healthcare sector remains a popular destination for private equity and venture capital investment – according to the EVCA, almost 9% of money invested in 2006 went to companies in the healthcare and medical industry, the fourth highest proportion behind the consumer, communications, and industrial products and services sectors.