Community Hospitals sells 14 homes to Bupa

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Community Hospitals Group yesterday agreed to sell 14 of its 16 nursing homes to a subsidiary of Bupa for pounds 34m, of which pounds 28.6m is in cash. The balance represents BES investment funds which Bupa is assuming.

The homes were put up for sale by tender in February, marking a change of policy in the group which will now concentrate on its 10 private hospitals around the country. One of the company's two remaining homes will be sold separately and the other will be retained as part of an integrated medical complex.

The nursing homes division made a pounds 2.8m operating profit on a turnover of pounds 10.5m in the year to the end of last June.

The City thinks Community Hospitals achieved a good price for the businesses and the shares rose 3.5p to 375p, against the market trend yesterday.

Bupa is paying around pounds 44,000 per bed and at least pounds 4m more than the net asset value of the division. Analysts had expected the company to realise around pounds 30m from the disposal.

Alan Dexter, chairman of Community Hospitals, said yesterday: "We are delighted to have been able to secure an exit from the nursing home business so speedily and at a price that reflects our expectations. This disposal creates the opportunity for us actively to pursue the development of our more profitable hospitals business, where we are confident that the prospects are excellent."

The cash will be used initially to repay debt, which could save the group around pounds 2.7m in interest charges, and will have a modest diluting effect on earnings. However, the company said that the impact on the current year would be negligible.

The cash will be used to buy more small private hospitals. But analysts noted that insurance firms are exerting heavy pressure on contract prices which reflect the countrywide oversupply of private hospital beds.