Priory mental healthcare chain set to be sold for £1bn

US owner Acadia confirms it has received several initial bids for UK group

Britain’s biggest mental healthcare provider, the Priory Group, is set to be sold for almost £1bn after its American owner confirmed it had received “multiple” initial bids.

Nasdaq-listed Acadia Healthcare appointed investment bank Rothschild last year to sell the business, which runs 361 healthcare centres in the UK.

Progress stalled as a result of uncertainty over Britain’s departure from the EU and the opposition Labour party’s threat in last year’s general election to end outsourcing of NHS services. A series of care scandals at the mental healthcare chain have also been factors.

But last month Acadia received bids from companies including the Australian hospital group Ramsay Health Care, which is backed by private equity firm CapVest, and German hospital provider, Schoen Clinic, in which Carlyle has a stake, according to people briefed on the process. The asset management firm Brookfield is understood to have looked at the Priory business but decided not to bid.

Acadia confirmed it had “solicited and received initial, non-binding offers from multiple bidders and is currently in the second phase of the sales process”.
Carlyle, CapVest and Brookfield declined to comment.

Acadia bought Priory from private equity firm Advent International in 2016 for £1.28bn and merged it with another UK healthcare company it owned, Partnerships In Care. The company ran into competition issues and was forced to sell 22 of its hospitals.

The US group is unlikely to receive the same price it paid for Priory because the business requires significant capital investment, industry insiders said. It will also incur currency losses because it bought the company shortly before the pound tumbled after the EU referendum result.

Mental healthcare has been a big casualty of the UK government’s cost-cutting over the past decade, but this has benefited the private sector.

About a quarter of NHS mental healthcare beds in England are provided by the private sector, with 98 per cent of the private facilities’ earnings coming from the health service, according to Candesic, a healthcare consultancy.

In a recent presentation, Acadia said it expected to be able to improve rates and margins by increasing demand for its services.

Michelle Tempest, partner at Candesic, said that despite Priory’s problems, the fundamental drivers in the mental healthcare market remained strong.

“Venture capital spent around £600m on mental health technology over the last year, so it’s no surprise to see appetite pouring into the bricks and mortar hospital assets as well,” she said.

Industry experts expected a flurry of health and social care deals to be struck this year after sales stalled ahead of the UK general election and the run-up to Brexit.

Last July Australian infrastructure bank Macquarie blamed fluctuations in exchange rates caused by Brexit for its decision to pull out of a £2.5bn purchase of care home provider Barchester Healthcare.

But BMI Healthcare, Britain’s largest private hospital provider, was sold to its smaller rival Circle for an undisclosed amount at the end of last year.

Priory and rival Cygnet Health Care, which is owned by the NYSE-listed Universal Health Services, have come under pressure from industry regulator the Care Quality Commission after failures exposed in television documentaries. The companies attribute their difficulties in part to trouble finding staff, forcing them to rely on more expensive and less skilled agency workers.

Acadia is the biggest behavioural health provider in the world with 585 facilities and about 18,200 beds in 40 US states, Puerto Rico and the UK.

Source: Financial Times

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