Private equity firms compete to buy up care home provider Four Seasons

Private equity firm, Terra Firma, is reportedly one of the front runners in a deal to buy up some of Four Seasons Health Care, which runs 445 care homes in the UK.

The group bought 140 homes from the failed Southern Cross business in 2011 and needs to raise £230m from shareholders and £550m from other sources to repay £780m debts which are due to be repaid in September. The group employs 30,000 staff and cares for about 20,000 residents and is estimated to be valued at between £820-900m.

Potential investors are said to include Terra Firma and a consortium of American healthcare specialist Formation Capital and London-based private equity firm Patron Capital.

Terra Firma, run by Guy Hands, a Guernsey-based tax exile, recently paid £276m for 128 garden centres through its acquisition of The Garden Centre Group to add to its portfolio of wind farms, Odeon cinemas and property.

Terra Firma recently lost £1.75bn after buying record label EMI in 2007.

There is also said to be a third "mystery" bidder - a consortium that includes a real estate developer and an operator of care homes. Four Seasons is 40 per cent owned by The Royal Bank of Scotland.

The company is still in talks with existing shareholders led by Royal Bank of Scotland Group PLC (RBS) about a refinancing deal, which could involve RBS and other creditors-turned-holders putting in more equity and a new investor taking a minority interest.

A spokeswoman for Four Seasons Health Care group said: “The directors of Four Seasons Health Care and their advisers are in discussions with potential new investors. In parallel discussions continue with existing shareholders about refinancing. The options are still open as before. They are debt refinancing and new equity from existing shareholders, as well as potential funding from new investors or combinations of these options.”

In an earlier statement, the company said: “We were saying on the record in 2010 that these would be the options, so we remain on track with our original plan.

"While it is true that the debt markets are not easy at the moment, we have a high level of interest being shown in the Group by potential backers. The company and its financial advisers are in contact with potential backers who have expressed an interest in investing in Four Seasons.”

Justin Bowden, national officer for GMB, the union for staff in Four Seasons’ care homes in the UK, said “The £780m debt mountain Four Seasons is saddled with hasn't gone away. Four Seasons has been secretly up for sale for months. Four Seasons are relying on shareholders or new investors to plug their £230m refinancing gap. This explains why independent ratings agency Company Watch gave Four Seasons a 14 point out of 100 points rating, meaning it is classed as 'very vulnerable'"

However Four Seasons claims it increased capacity by 40 per cent in 2011 by acquiring the business of Care Principles and taking over homes from the failed Southern Cross without the need for additional financing.

A spokeswoman for the company said Four Seasons is turning around the former Southern Cross homes and increasing occupancy.

Four Seasons also owns around 60 per cent of the facilities it operates so it is not over-exposed to rental costs (unlike Southern Cross).

She added: “Far from cutting back, Four Seasons has committed to spend £29m on enhancing its homes over 14 months from November last year to end of this year. On a per bed basis that is about 40 per cent higher than the sector average.”

Four Seasons Health Care operates 445 care homes, 61 hospitals and specialist units in the UK, Isle of Man and Jersey.

Four Seasons’ chief executive, Pete Calveley is pictured above