HgCapital has agreed to pay Duke Street Capital £322m (US$566.3m) for specialist residential services portfolio company Paragon Healthcare Group. The price is a reported 18x Paragon’s estimated earnings before interest, tax and depreciation for this year.
Paragon’s sales for the 12 months to March 2005 were £100m, up from £75.7m the year before.
The auction, which was run by Close Brothers, had struggled as property tycoon Robert Tchenguiz and buyout firm Apax Partners both pulled their leading estimated £350m offers, allowing HgCapital back in.
Paragon provides speciality community-based residential care for people with learning disabilities from more than 250 homes with 1,600 places in the UK. Duke Street bought the business in 2001 for an undisclosed sum and then made four further acquisitions before refinancing it for £162m. It has made a reported 4x its money on the deal.
In 2002, HgCapital acquired Castlebeck Care, another UK-based specialist healthcare and rehabilitation services company for patients with learning disabilities and severely challenging behaviour, and boosted capacity by 60% through a series of bolt-on acquisitions.
HgCapital was advised by Merrill Lynch, with Linklaters as legal counsel, Deloitte for financials, PricewaterhouseCoopers on commercial due diligence, Willis as insurance and Christie & Co Pinder Professional and Consultancy Services for property valuation.
The property portfolio at Paragon is worth a reported £370m but HgCapital is not expected to monetise it through an initial sale-and-leaseback.