Ex-Priory chief in £450m swoop on Bupa care homes

CONTROVERSIAL businessman and Labour Party donor Chai Patel has held talks over a possible bid to buy half of Bupa’s care home estate for up to £450million.

A deal to buy the 150 sites would transform Patel’s existing business, HC-One, into Britain’s biggest care homes operator.

Patel, former chief executive of the upmarket mental health care provider The Priory Group, has appointed investment bank Gleacher Shacklock to advise him.

But other unnamed bidders are said to be also vying for the sites, which Bupa has been trying to sell since late last year.

The estate represents about half of Bupa’s care homes business and includes 15,000 staff, but not the Bupa brand. City sources said the 150 care homes could fetch between £300million and £450 million.

The potential bid comes as the care homes sector faces huge financial pressures.

According to the health think tank the King’s Fund, spending by local authorities on social care has fallen by 9 per cent in real terms between 2009-10 and 2014-15.

Care home operators have been warning that the increase in the minimum wage has put unbearable pressure on the industry.

City sources said HC-One needs to raise a substantial amount of capital to finance the takeover and has been talking to several unconventional lenders, such as hedge funds, as several of Britain’s traditional banks have shied away from backing the deal.

Patel, who became embroiled in the cash-for-peerages scandal in 2005, created HC-One in 2011 when it took over a third of Southern Cross’s homes after that company collapsed under its debt pile.

Since then, HC-One has been on a major acquisition spree, gobbling up as many care homes and companies as possible.

In 2014, HC-One was sold to a group of private equity firms for £477million. That deal netted the HC-One management team, including Patel and its directors, around £30 million.

Reports last year suggested HCOne was saddled with about £250million of debt and was looking to carry out a sale and leaseback deal on the some properties to reduce its borrowings.

Fears are growing that if HC-One takes on even more unconventional debt to finance the purchase of the Bupa portfolio it could leave the group susceptible to a financial crisis similar to the one that beset Southern Cross.

However, Henry Elphick, chief executive of healthcare intelligence company Laing Buisson, said: ‘HC-One is a very credible operator. It’s the best performing large care provider in the country and has demonstrated a strong track record by turning around the Southern Cross portfolio.’

Bupa and HC-One both declined to comment.