Healthcare sector comment – October 2010

Date

Welcome to Clearwater’s latest report on mergers and acquisitions activity in the healthcare sector, covering transactions in the third quarter of 2010.

Clearwater’s most recent transaction in the sector was advising private equity buy and build specialist Sovereign Capital on the management buyout of independent supported living provider, Eden Supported Housing. If you would like to discuss any M&A related issues, please contact Ramesh Jassal or Andy Moore or call 0845 052 0360.

During the last three months we have seen increasing M&A activity in the healthcare sector, including Craegmoor’s recent acquisitions of Positive Living, a supported living business, and Burnside Care, an independent hospital providing mental health and learning disability services. We are also seeing a continuing consolidation of the residential care market, with the likes of Barchester acquiring a private pay elderly care residential asset Gorseway Care.

Over the next few months we will be keeping a close eye on potential transactions such as the sale of Priory and whether this will kick start further deal activity.

Several private equity groups continue to show strong interest in the mid market, for example Marlin Equity Partner’s management buyout of Hospedia, Sovereign Capital’s acquisition of Guardian Homecare and Lyceum Capital’s acquisition of New Directions. Private equity will continue to search for opportunities, which could include new outsourcing opportunities as the NHS releases non-core assets.

Following the announcement of the comprehensive spending review, we expect to see a flurry of deals being marketed in the healthcare sector, businesses getting ready to be marketed, and new opportunities and business models appearing.

Deals

City & County Healthcare (C&C HC) has acquired Guardian Homecare from BUPA. Guardian Homecare provides elderly and learning disability care, for an undisclosed consideration. C&C HC, portfolio company of Sovereign Capital, continues to grow via its buy and build strategy and had more recently acquired Sterling Homecare, another domiciliary care business.

Eden Supported Housing, a company providing services to adults with learning disabilities backed by Sovereign Capital, has been acquired in a management buyout transaction.

CareWatch has acquired New Directions Care & Support for an undisclosed sum . New Directions provides domiciliary care services to individuals with mental, learning and sensory disabilities. CareWatch, a portfolio company of Lyceum Capital, had recently injected a further £25m into the company to further its expansion plans.

Craegmoor Group has acquired Positive Living, a residential care home group providing supported living services, for a minimum estimated value of £10m.

Serco-backed joint venture GSTS Pathology has added the pathology unit of King’s College Hospital NHS Foundation Trust to its partnership. GSTS has been awarded a ten-year contract valued at around £300m. The joint venture model is a successful way of accessing the NHS’s several billion pound pathology market and will be replicated by others entering the UK market.

3i backed pathology firm Labco, and Sodexo, have formed a joint venture platform called Integrated Pathology Partnerships (iPP) which provides pathology solutions. iPP will partner with UK healthcare organisations to deliver pathology services that are responsive to users, cost effective and support NHS national clinical programmes.

Private equity firm Sovereign Capital has acquired Christchurch Court. Christchurch provides residential care for adults with brain injuries, for an undisclosed sum.

Elder Pharmaceuticals Limited has launched a tender offer to acquire the remaining 80% stake in NeutraHealth Plc. NeutraHealth Plc provides vitamins and supplements also known as neutraceuticals. The transaction will be conducted via a scheme of arrangement.

Marlin Equity Partners has acquired Hospedia. Hospedia is a provider of bedside communication and entertainment systems to patients, for a consideration of £6m.

Management have acquired Chelmsford Medical Centre from Med-Tel, a diagnostics company. CMC owns and operates an ambulatory surgical and diagnostic imaging centre in Chelmsford.

Craegmoor has acquired hospital operator Burnside Care. Burnside care provides a mental health and learning disability service, allowing Craegmoor to expand its service provision in Yorkshire. The value of the deal was not disclosed.

PH Healthcare Ltd has acquired Medisavers, a UK-based manufacturer of disposable medical products, from Brosch Direct Ltd. It was simultaneously announced that BM Polyco Ltd a joint owner of PH Healthcare has also acquired Bodyguards, also owned by Brosch Direct.

Management have acquired Joerns Healthcare Ltd from Park Avenue Equity Partners and Vestar Capital Partners. Joerns Healthcare is a provider of beds and furnishings, lifting and repositioning, and wound management products, for an undisclosed consideration.

CCS Central Ltd was acquired via a management buyout. The company trades as Complete Care Services a domiciliary care provider. No financial details were disclosed.

Barchester Healthcare Ltd has acquired Gorseway Care, a private pay elderly residential care service from Hermitage Housing Association. No further details have been disclosed at present. Rosewood Health Care has acquired Fairfield Nursing Home. The acquisition has been valued at £1.7m.

Medicals Direct Group has acquired Medibureau, a London-based healthcare and administration company. The consideration was not disclosed.

Meridian Bioscience Inc, the listed US based Life Science Company, has acquired Bioline Ltd. Bioline, a manufacturer and distributor of molecular biology reagents, for a cash consideration of $21.57m including net cash.

Nestle SA has acquired Vitaflo International. Vitaflo is a UK based manufacturer of nutritional products for people with inherited metabolic disorders and disease related to malnutrition, for an undisclosed consideration.

Allergy Therapeutics plc has agreed to acquire Teomed AG, the Greifensee, Switzerland-based developer of allergy pharmaceuticals. Under the terms of the agreement, Allergy Therapeutics will acquire Teomed for a consideration of CHF 1.2m.

Sanctuary Group has acquired Heart of England Housing and Care from Orbit Group, taking over nine Worcestershire care homes.

Healthcare Locums Plc has agreed to acquire Redwood Health Ltd. Redwood is a company providing medical services, for a consideration of £6.65m.