HgCapital has announced the sale of Castlebeck to Barchester Healthcare Group for £255m (US$470m).
HgCapital acquired Castlebeck, the independent provider of specialist healthcare and rehabilitation services for adults and adolescents with learning disabilities, from 3i for £50m in July 2002.
According to Lindsey Dibden, a partner at HgCapital and head of healthcare: “We considered selling Castlebeck a year ago and engaged Rothschild, but then we saw the pricing valuations in the sector and decided to hang on to it for a while and grab some profit.”
Two recapitalisations followed, for £75m in March 2005 and for £30m in March 2006. “The recaps allowed us to take £54m off the table in advance of the sale,” says Dibden. Overall the investment in Castlebeck gave HgCapital a money multiple return of more than 9x.
Castlebeck’s fit with Barchester is not immediately obvious. Barchester is fundamentally an elderly short-term healthcare group, which acquired a similar business, Westminster, from 3i in 2004 for £525m. But the combination of Castlebeck and Barchester could be the beginning of a much talked about trend of creating healthcare conglomerates in advance of a potential IPO.
Dibden says: “There is no direct fit between the two. They will probably run the businesses separately until they figure out what they have bought and what the synergy values are. Both businesses are in the process of property building and there could be cost savings there.” He argues that the IPO of Southern Cross will be an interesting test of the conglomerate theory, saying: “I think that the business is just big enough, but is the market ready for it?”
The sale of Castlebeck follows a number of recent healthcare deals by HgCapital, including the £322m acquisition of Paragon Healthcare in April and the successful IPO of ClinPhone on the London Stock Exchange for £94m earlier this month.