Care First faces fight to secure pounds 100m contracts

Care First, the troubled nursing homes group, is facing an uphill fight to secure pounds 100m of contracts with two local authorities. News of the struggle to retain the business with the authorities comes just a fortnight after a boardroom row at the company, which culminated in Chai Patel quitting his job as chief executive.

According to sources Mr Patel, who joined Care First in October when his company, Court Cavendish, merged with Takare, is understood to have fallen out with Keith Bradshaw, Takare's executive chairman.

The fallout from Mr Patel's departure has unsettled investors, and has started to generate concern among some of the company's clients. Care First's shares have fallen steadily from 151p since the merger to the current level of 97.5p.

A source at Bedfordshire County Council said yesterday that it was reconsidering whether to sign a pounds 70m 10-year contract with Care First, which is the UK's largest nursing home operator. The contract is due to be formally signed by both parties on Tuesday next week.

Failure to secure the contract could be damaging to Care First's expansion plans. The contract with the local authority would be one of Care First's largest, involving managing all of the county's 15 elderly residential homes and also some day centres.

The terms of the deal also include a multi-million pound refurbishment programme and the establishment of a separate trading company, to be called Care First Bedfordshire.

An insider at Bedfordshire County Council said yesterday: "We met Mr Patel and were very impressed with his professionalism. We selected his company as the best of four companies pitching for the contract.

"This is very worrying. We could very well reverse our decision given that one of the key players has left. It could very well be that this contract is not placed with anyone on Tuesday."

A contract from Bromley Social Services which was originally won by Mr Patel's former company, Court Cavendish, is also being "looked at closely" in the light of recent events, according to insiders. The Bromley contract is worth pounds 4m a year for five years.

Meanwhile there is still confusion about how Mr Patel's departure was handled within the group. While Mr Bradshaw maintains that Mr Patel's resignation came "out of the blue" to himself and the board, it is understood that Mr Patel went to Keith Ackroyd, a senior non-executive director, about his differences with Mr Bradshaw several weeks before his resignation.

Mr Patel is believed to have felt constrained in making decisions and wanted Mr Bradshaw to specify a date when he would step down to become non-executive chairman. According to sources, Mr Ackroyd consulted directly with Mr Bradshaw rather than putting the issue to the entire board. Care First, however, said that all board members who were in the country at the time were consulted about the situation with Mr Patel.

Immediately following Mr Patel's departure, Mr Ackroyd, formerly at Takare, was appointed deputy chairman. It is believed that his salary was doubled to around pounds 35,000. Both Mr Ackroyd and Ian Kirkpatrick, a second non-executive director, are currently talking to institutional investors who are concerned about Mr Patel's departure. Several institutions have called for Mr Patel's reinstatement.

Friends close to Mr Patel said, however, that he was unlikely to agree to return without the resignation of Mr Bradshaw.

He was also looking for the resignation of Ron Reid, finance director and formerly a director at Takare.