April 30 (Bloomberg) -- Merrill Lynch & Co.'s private equity unit, French buyout firm PAI Partners and U.K.-based Doughty Hanson & Co. are competing to buy Nordic health-care company Ambea for as much as 900 million euros ($1.4 billion), four people with knowledge of the plans said.

3i Group Plc, Europe's biggest publicly traded private- equity firm, is selling Stockholm-based Ambea, which has 6,650 workers across Sweden, Finland and Norway. Ambea runs outpatient clinics, hospitals and also provides disabled and elderly care. The bidders made 3i's short list, the people said, declining to be identified as details are private.

Demand is rising for medical and diagnostic services as sedentary lifestyles and aging populations fuel a rise in diseases. The number of people aged 65 and over will surge by 77 percent between 2004 to 2050, according to European Commission projections. The number of people aged 80 and over is expected to more than double in the same period.

``There is a demographic trend of people getting older and also richer,'' Daniel Mahony, who helps manage health-care funds at Polar Capital in London. ``In Europe, people are beginning to take on additional private health insurance, which they otherwise would have got from the government 10 years ago. There are long- term trends.''

Ambea's Owners

Ambea is 75 percent controlled by London-based 3i, 15.9 percent owned by the Government of Singapore Investment Corp. and about 9 percent owned by management, according to its Web site. Morgan Stanley is managing the sale and second-round offers are due in late May, three of the people said.

Jennifer Letki, a spokeswoman for 3i declined to comment and a spokesman for PAI wasn't immediately available. Annabel O'Connor, a spokeswoman for Doughty Hanson in London declined to comment. Spokespeople for Merrill Lynch and Morgan Stanley in London declined to comment.

3i is selling at a time of increased interest in health-care assets. Bridgepoint Capital Ltd. paid $800 million in May 2007 for a subsidiary of Gambro Holding AB to tap growing demand for dialysis services. BC Partners sold Hirslanden Holdings, Switzerland's biggest private medical-center operator, for 2.85 billion Swiss francs ($2.6 billion) in August last year.

Buyout firms use a combination of their own funds and debt to pay for takeovers. They seek to expand companies or improve performance before selling them within five years to other funds or investors through stock offerings.

Fewer Buyouts

After announcing a record $537 billion of deals in the first six months of 2007, the pace of buyouts fell. Private-equity firms announced $202 billion of acquisitions worldwide in the second half, data compiled by Bloomberg show. The firms have announced about $98.3 billion of deals in 2008.

Publicly listed health care companies have also been active this year. Novartis AG, the Swiss drugmaker facing product delays and generic competition, agreed to buy 77 percent of eye-care company Alcon Inc. in a two-step transaction totaling $39 billion this month.

Takeda Pharmaceutical Co., Japan's largest drugmaker, also agreed in April to buy Millennium Pharmaceuticals Inc. for $8.8 billion, gaining the cancer medicine Velcade that is poised to win wider use.

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net;

Last Updated: April 30, 2008 10:45 EDT