Due to its size, the European Commission was reviewing the deal, which would have seen NHP merge with Blackstone's Southern Cross nursing homes business. But after a request by the OFT, the Commission said yesterday it would hand the investigation back to the UK authority. "The transaction will lead to some horizontal overlaps between the parties. [They] would become the biggest service provider in some local areas," the Commission said.
The OFT believes there could be competition issues in three areas, Arbroath, Nottingham and Port Talbot, where a merged Southern Cross and NHP would have a high combined market share. "The Commission has decided to refer the case as the concentration affects competition in a distinct market within the UK," Brussels said.
Blackstone announced its acquisition of NHP, one of the largest care homes providers in the UK, in November, only two months after its takeover of Southern Cross. NHP owns about 355 care homes, but only manages about half of them, and Southern Cross is one of its largest tenants. Through a takeover of NHP, Blackstone had hoped to cut costs. The two businesses would control about 18,000 care-home beds, a market share of up to 4 per cent. But its concentration in some regions is alarming UK competition bodies.
Upwards of pounds 1bn of nursing home assets are on the market at the moment amid a frenzy of corporate activity in what is a highly fragmented, but growing, care homes market.
Blackstone missed out on the takeover of Westminster Healthcare last year, which was bought instead by Barchester, a chain owned by the Irish entrepreneurs, Dermot Desmond, John Magnier and J P McManus, in a deal worth pounds 525m. Four Seasons, the second largest UK operator behind Bupa, was sold to the German insurer, Allianz, in July last year for pounds 775m. Also believed to be preparing for a sale is Ashbourne Healthcare, and BetterCare, a 3i-owned venture.
Paul Sapel, of LCS International, a consultant to the healthcare industry, believes the OFT investigation could have significant ramifications on other takeover deals. "The OFT is rattling the cage of the sector. A lot of companies thought they could keep buying other nursing home businesses may have to revisit their plans," he said. "But there is now a clear signal to the market that the OFT may restrict deals, which may put some people off bidding or lower the value of assets."
With an ageing population and a wealthier generation of elderly people, care-home beds are increasingly in demand.