Healthcare groups form £300m alliance

Barchester healthcare, a nursing home group largely owned by Irish sporting tycoons John Magnier, JP McManus and Dermot Desmond, has agreed a strategic alliance with a hospital company that values the combined business at £300m.

Barchester is investing an initial £30m for a 25 per cent stake in Cygnet, which will invest £7m in its new partner in a deal that may lead to a full merger within two years.

Cygnet has more than 500 beds in 13 private hospitals providing in-patient psychiatric care and specialises in treating eating disorders and drink and drug addictions. Barchester, which operates 4,272 beds at 74 care homes, is chaired by Denis Brosnan, the former chief executive of Kerry Group.

Under the terms of the alliance, the two companies will co-operate in selecting and developing sites for new facilities as well as sharing support services. Between them the companies are planning 15 new care homes and four hospitals, which would represent the largest building programme outside the NHS, representing 1,500 new beds.

Together Mr Magnier and Mr McManus, who are best known for their investments in Manchester United, and Mr Desmond, a majority shareholder in Celtic, own more than 40 per cent of Barchester.

Mike Parsons, Barchester's chief executive, said the companies were on track to deliver core profits of at least £42m next year. "At that level Barchester and Cygnet will have real critical mass," he said.

The deal comes amid growing speculation that the healthcare sector is about to go through a process of significant consolidation. Experts believe the combined company would be in a good position to gain from that.