Care First battle set to escalate

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The Independent Online
The battle for control of Care First looked set to escalate this week, as speculation intensified that two venture capital companies were poised to throw their hats into the ring. But Lea Paterson finds Bupa is still confident of winning.

Bupa, the private medical insurer, hit back yesterday at weekend speculation that it could lose out in the battle to take over Care First, the UK nursing home operator.

A spokesperson for Bupa yesterday expressed confidence that Bupa would be able to win over shareholders. He said: "Bupa has made a full, fair and firm offer. As far as I know, it's the only offer that is on the table at the moment."

Care First, which last week recommended that its shareholders reject Bupa's pounds 241m offer, is currently believed to be talking to two other parties.

Chai Patel, chief executive of Care First until just two months ago, is heading a consortium understood to be backed by BC Partners, the venture capitalist, and is expected formally to throw his hat into the ring this week. Warburg Pincus, the American venture capital firm, is widely thought to be the other potential buyer.

But the two venture capitalists are not thought to have the financial clout of Bupa. Care First's debts total around pounds 100m, meaning that a bidder wishing to match Bupa's offer would need to raise a total of pounds 350m.

Some commentators believe that, if they were to raise the necessary cash, the two venture capitalists could become overgeared. One said: "The true sum that one would have to raise is pounds 350m. You need to think what that does to these companies' interest cover."

Care First and Bupa had been in takeover talks for some weeks prior to last week's announcement by Care First that the Bupa offer failed to take account of current trading and Care First's "excellent prospects". At the same time, Care First said it had received expressions of interest from other parties and it would continue to pursue these to maximise shareholder value.

Mr Patel, who quit Care First in September following disagreements with Keith Bradshaw, Care First's chairman, emerged as a potential counter- bidder last week, saying that he "would be unwise not to consider" reclaiming control of the nursing home group. Mr Patel still owns around 1 per cent of Care First's shares.