Four Seasons, Britain’s second biggest care home chain, which houses 16,000 elderly residents, could be sold for as little as £400m, half the price it fetched when it was sold to Guy Hands’ Terra Firma seven years ago.
The sharp drop in Four Season’s value underlines how the care home sector has come under intense pressure since local authorities cut the fees they pay for the elderly, as well as being hit by a shortage of nurses, high debt levels and rising costs.
Private equity and hedge funds are circling Four Seasons, whose holding companies have been in the hands of administrators since April, with offers worth £400m to £600m for the business, according to two people briefed on the sale process.
Bidders include three companies, each with a vested interest. One is H2 Capital Partners, the US hedge fund that is the business’s largest creditor and in effect owner since Terra Firma ran out of cash in December 2017.
The other bidders include Cheyne Capital, the second biggest bondholder, and Davidson Kempner Capital Management, a Texas-based fund that is one of the company’s landlords. Roundhill Capital, a property investor that provides senior accommodation, is also a contender.
The downtrodden price for Four Seasons comes after the recently failed attempts to sell three other UK care home chains — Barchester, HC-One and Care UK.
But investors believe Four Seasons, which owns the properties used by 60 per cent of its homes, has better prospects now that the company’s debt has been reduced and occupancy rates have risen.
Julian Evans, head of healthcare at Knight Frank, said the Four Seasons “platform represents a significant turnround opportunity”.
Any sale would come as a relief to the government and the industry regulator, the Care Quality Commission, which has been monitoring the situation closely amid fears that local authorities would have to take over the indebted company and its 320 homes and 22,000 employees.
Terra Firma paid £825m for the company in a debt-fuelled deal in 2012. But since then its financial performance has deteriorated and its underlying profits have halved while it has also sold some of its portfolio over those seven years, according to two sources close to the sale process.
The auction also excludes 24 more profitable care homes, which are on sale separately by Terra Firma for about £200m. Patron Capital Partners, a property investor, is interested.
Other investors such as Renaissance Care in Scotland, which is 90 per cent owned by Robert Kilgour, who founded Four Seasons in 1989, are also keeping watch. But they are keen on only parts of the business, while the administrators are selling in one lot — even if it is then broken up.
Four Seasons Health Care Group said it welcomed the high levels of interest and reiterated that “nothing has changed in terms of our aim that the process achieves a whole group solution”.
The sale process is being led by BDO. The administration process is being handled by Alvarez & Marsal, which is hoping to secure a deal by the end of the year. Cheyne Capital, Roundhill Capital and H2 Capital Partners declined to comment; Davidson Kempner Capital Management could not be reached
