Cinven secures bolt-on for hospital group

LGV Capital, the UK mid-market buyout firm, has exited the hospital group it bought from BUPA in 2005. Rival Cinven is reuniting the hospitals with a larger group it acquired from the UK private healthcare insurer.

European buyout firm Cinven has bolted on Classic Hospitals in a £145 million ($287 million; €193 million) trade buy for Spire Healthcare, formerly BUPA Hospitals.

Spire Healthcare:
reuniting BUPA
Hospitals

The acquisition makes Spire Healthcare the second largest private hospital group in the UK. Cinven bought Spire from private healthcare insurer BUPA in June last year for £1.44 billion.

The company spokesman at the time of the deal said BUPA had sold the business because competition authorities had stopped it growing the business further. An example of this was BUPA’s attempt to buy Community Hospitals at the turn of the millennium, which was stopped by UK competition authorities.

UK mid-market buyout firm LGV Capital acquired nine hospitals from BUPA in July 2005 for £85 million to form Classic Hospitals. It then purchased Lourdes Hospital in Liverpool in 2006. LGV also invested £23 million to update the company’s facilities.

The firm also assembled a management team and established a head office. Revenues increased by 19 percent to £94 million in the year to December 2007.

Michael O’Donnell, a managing director at LGV, said: “The logic for Cinven is pretty strong [due to the trend towards consolidation in the private hospital sector] – our strategy with Classic was we either needed to become substantially larger or to be consolidated ourselves.”

According to a source close to the deal LGV made a return approaching three times.

Cinven also owns UK mental health company Partnerships in Care and Spanish healthcare group USP Hospitales.

Separately LGV has sold manufacture and distributor of infection control products Verna to HBoS. Terms were undisclosed but a City source said LGV had sold the company for around £50 million and it had made a more than 20 percent internal rate of return.

LGV bought the business in May 2005 for £55 million, the source said.

Bill Priestley a managing director at LGV, said Verna was a conglomerate of six divisions when his firm bought the company and it decided to break up the group. “We had a collection of businesses which had relatively little synergies.” LGV reorientated the business selling on the remaining five divisions. It then focussed on growing the main division before selling it to HBoS.