Bupa faces split to win CHG clearance

Bupa, Britain's biggest privately owned health insurer, may have to break itself up in order to persuade the competition regulator to give the go-ahead to its deal to buy Community Hospitals Group.

Bupa, Britain's biggest privately owned health insurer, may have to break itself up in order to persuade the competition regulator to give the go-ahead to its deal to buy Community Hospitals Group.

The Competition Commission said yesterday that separating Bupa's private hospitals division from its insurance arm was one option that it was considering recommending.

However, a Bupa spokeswoman said: "We have ruled out selling off part of the business. If that was what was required, we would not continue with the deal." The acquisition would give Bupa 25 per cent of the private hospitals market.

The news follows a recommended 650p-a-share offer Bupa, made for CHG in April, which values the quoted hospitals group at £230m. It then picked up a 27 per cent stake in the business.

The bid sparked competition fears because it would give Bupa a dominant role as the provider of insurance and as the owner of hospitals that tender for medical business. Critics fear Bupa will be able to award its own hospitals with business when they do not necessarily offer the best deal, and will be able artificially to inflate prices.

The Competition Commission said yesterday that if it did not recommend a full split, it might require Bupa to increase the distance between the two parts of the business. It also may pin-point specific hospitals that Bupa would have to sell.

Bupa, which has been invited to respond to the options ahead of a formal report due on 8 November, said it has expected the suggestions. However, analysts said the proposed conditions were surprisingly negative. One said: "It is now very unlikely that Bupa will be allowed to buy CHG without significant changes to its structure."