The private equity firm Advent International will be buying the care home and addiction clinics operator Priory Group for £925 million, including the group’s book debts.
The mental healthcare group is presently owned by a consortium of lenders led by the tax-payer owned Royal Bank of Scotland.
Rising rentals and staff wages along with government spending cuts are sure to put pressure on the margins of the industry in the days ahead.
However, the PE firm said that it’s confident that the Priory Group will receive more public funding for health and education and it believes that going forward, the demographic trends will also be favorable. In fact, the group is so bullish on the sector that it plans further acquisitions to tap “opportunities for consolidation that emerge in the sector driven by a strong combination of social trends and economic and regulatory reform”.
In a statement issued by RBS, the state owned bank said that the Priory deal was part of the banks strategy to reduce the size of its balance sheet. It described the Priory Group as “legacy private equity asset”.
Other funds like Bain Capital was once dubbed as a potential suitor, but a deal never materialized. RBS holds a minority stake in Priory group – the percentage of ownership is not known, and the deal will bring in cash worth £133 million, after settlement of debt.