After a couple of months of speculation as to who was pursuing it, it has finally been announced that Terra Firma, the private equity firm run by Guy Hands, is to acquire Four Seasons Health Care, the UK-based care home operator. Four Seasons has the burden of £780m of debt that was due to expire in September hanging around its neck, and has been in talks with a number of different parties as to how to move forward and refinance. A number of private equity firms including CVC Capital, KKR and various consortiums had reportedly been interested, as had Bondcare Homes, another UK-based care home provider.
Naturally the announcement by Terra Firma that the deal is expected to close in mid- July has done nothing to comfort employees and families of residents at Four Seasons for two reasons. Unfortunately, despite a good number of successful deals in a long deal making career, Guy Hands and Terra Firm are now renowned for the infamous EMI deal that ended in significant losses for Terra Firma and its investors, and a very high profile court case. In addition to this, last year saw all the issues with Southern Cross Healthcare, whose collapse was laid firmly at the door of Blackstone, the private equity giant who acquired the business in late 2004 and proceeded to set up a sale-and-leaseback business model. Add in to the mix Advent International owning The Priory and Craegmoor Healthcare, and it’s easy to see why suddenly trade unions and the public at large are once again becoming sceptical of private equity when it takes an interest in a particular sector.
That said, Terra Firma are reportedly about to pay in the region of £825m for Four Seasons Health Care, and neither party can afford this deal to go wrong.