The Priory psychiatric hospital group is confident of putting together a bid with a private equity partner for Four Seasons in the expectation of the care homes company’s being auctioned off by its creditors, people close to the situation said.
The UK group has hired UBS to find an acquisition partner and has held talks with Blackstone, Apax and Kohlberg Kravis Roberts. A partner would be expected to put in around £250m to £300m.
Four Seasons, which Priory values at about £800m, said on Sunday it was not expecting to be put up for sale imminently and would not comment on rumours about prospective bidders.
Last week Four Seasons secured a standstill agreement with creditors after failing to meet a £1.5bn debt repayment deadline in September, buying it a further three months.
Priory’s recruitment of UBS was said to be “a pre-emptive move” in preparation for an auction.
While expecting other bidders to emerge, people close to Priory said they believed it had the advantage of a management team in place and being “one of the few games in town close to finalising a debt package”.
Southern Cross is a likely counter-bidder, while private equity groups could mount a bid on their own.
The healthcare sector is struggling in the credit crunch, weighed down by a number of highly leveraged care home deals that are difficult to refinance.
A PwC report on Priory’s own position in 2007 said it had £575m of senior debt that, with shareholder loans, gave it overall debt of around £1bn. Servicing the debt has cost £74m this year .
Chai Patel, former chief executive of the Priory, said last week there was a risk of the social care sector “tipping over” into a wave of closures.