Buyout Firms Seen Sparking Next Health-Care Deal After Rhoen

Fresenius SE’s 3.1 billion-euro ($4.1 billion) bid for Rhoen-Klinikum AG (RHK) was the biggest in European health-care services in more than five years. Buyout firms may spark the next transactions.

Acquisitions of European private equity-owned facilities such as hospitals and lab operators in the region last year more than doubled from 2010 to 6.2 billion euros, and more than 20 such assets may come to market by 2013, according to Credit Suisse Group AG. (CSGN)

Sweden’s Attendo Group AB may be among the first targets as owner IK Investment Partners AB weighs a sale for about 1 billion euros, according to people familiar with the matter, who declined to be identified as a decision hasn’t been made. Dealmaking is emerging from a five-year lull, while private-equity companies, which typically own assets for three to five years, are seeking to return cash to investors.

“They’re feeling pressure to show a return,” said Martin Henrichs, managing director of investment banking at Credit Suisse in London. “Private-equity firms are quite predictable when it comes to exiting their investments. They don’t want their investors’ money to sleep for 10 years.”

Bad-Homburg, Germany-based Fresenius yesterday offered 22.50 euros a share for Rhoen Klinikum to cement its position as Germany’s largest operator of private hospitals.

Last year, more than 80 percent of all deals in Europe’s health-services industry involved private equity, and the firms were involved in at least 60 percent of all transactions in the past decade. That trend will continue this year, Henrichs said.

Aging Populations

Hospital assets may attract both other buyout firms and industrial buyers such as Australia’s Ramsay Health Care Ltd. (RHC), which is likely to add to its 37 U.K. facilities, Nomura Holdings Inc. wrote in a report last month. Ramsay doesn’t comment on specific potential acquisitions, though it has previously indicated it was interested in European purchases, spokeswoman Carmel Monaghan said by email.

Buyout firms were drawn to hospitals for their steady cash flow, usable to pay down debt, as well as the outlook for growth in private elderly care as populations age and cash-strapped governments scale back spending. During the boom, buyout firms also sought to extract value from selling companies’ property.

Assets for sale include medical-testing company Biomnis, owned by London-based Duke Street Capital Ltd., people with knowledge of the plans said last month. Potential bidders include London private equity firm 3i Group Plc (III) and PAI Partners.

Biomnis, Four Seasons

Biomnis, based in Lyon, France, may be valued at between 300 million euros and 400 million euros, according to people with knowledge of the matter. Officials for Duke Street, 3i and PAI Partners declined to comment.

Four Seasons Health Care Group Ltd., a U.K. nursing-home company bought in 2006 by Qatari-backed Three Delta LLP and then taken over by lenders including Royal Bank of Scotland Group Plc (RBS), is considering bids as part of its talks with debtholders. Final offers are due this week and have so far included Terra Firma Capital Partners, the firm founded by British financier Guy Hands, two people familiar with the process said, declining to be named because the process isn’t public.

Four Seasons is in discussions with potential investors, the company said in a statement. A spokesman declined to comment further. A spokesman for Terra Firma declined to comment.

Attendo Sale

Four Seasons’ sale six years ago kicked off a spate of hospital-services deals that peaked at 11.8 billion euros in 2007 before withering.

IK Investment, the former venture unit of Swedish bank SEB AB, bought Attendo in 2006. IK hired JPMorgan Chase & Co. and SEB Enskilda to advise on options for the Danderyd, Sweden-based company, which would likely attract buyout firms in a sale, people familiar with the plans said, who couldn’t speak publicly as the plan is private. An official for IK declined to comment.

IK has yet to decide whether to pursue a disposal amid the public outcry prompted last year by allegations of patient mistreatment at a facility run by Stockholm-based Ambea AB. New York-based KKR & Co. (KKR) and Triton Partners bought Ambea in 2010 from London-based 3i. The controversy in turn raised questions in Sweden regarding private-equity practices in care homes.

Private-equity firms Apax Partners LLP and Nordic Capital Svenska AB jointly took Swedish hospital operator Capio AB private in 2006.

Plans Revived

Buyout firms may also revive mothballed sale plans. In August 2010, LBO France, one of the country’s oldest private-equity firms, stopped a process to dispose of its stake in clinic operator Medi-Partenaires SA because the bids it received weren’t sufficientt, people with knowledge of the decision said then. Two years earlier, Blackstone shelved the sale of French clinic chain Vitalia SA for the same reason.

A spokeswoman for Blackstone in London declined to comment. A spokeswoman for LBO France wasn’t available for comment immediately.

To be sure, private-equity firms may also decide to hold onto their assets and refinance the debt, as they have done in the past years, rather than selling them at unsatisfying returns or a loss, Henrichs said.

Private-equity firms have led $80 billion of deals across all industries globally so far this year, data compiled by Bloomberg shows. That’s 35 percent below the figure for the same period in 2011. The firms announced $390 billion of takeovers in 2011, less than half of the $831 billion announced at the market’s peak in 2007.

Renewed confidence in the U.S. and Europe will help spur an increase in deals across all industries this year, Goldman Sachs Group Inc. (GS) and Citigroup Inc. (C) predicted last month.

“We’re on a very good track” for hospital deals, given capital markets have rallied, Heinrich said. “If we sustain that momentum, we will be at better volumes than last year.”

To contact the reporters on this story: Trista Kelley in London at tkelley2@bloomberg.net; Anne-Sylvaine Chassany in London at achassany@bloomberg.net

To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net; Edward Evans at eevans3@bloomberg.net

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