Spire acquires Classic Hospitals
You could be forgiven for thinking that the mania for buying and selling private hospitals might have started to wane. The new Brownite Government is proving much less keen than its predecessor to encourage private sector involvement in the NHS, plus fears of recession could be expected to hit a business where so much value is tied up in property.
Not a bit of it! Spire Hospitals, the group formed last year when BUPA sold the last of its hospital interests to venture capitalists, Cinven, has bought the Classic Hospitals Group from Legal and General Ventures.
This brings all the old BUPA hospitals back into the same fold, as Classic was itself formed when BUPA decided to dispose of ten hospitals in July 2005. It was thought at the time that these small units serving small local populations were incapable of adapting to the new strategy of achieving economies of scale to win NHS business.
The managers who took that view, most of whom are still in place at Spire, seem to have got it very wrong. NHS business has not proved as reliable or as profitable as hoped, and the traditional private insurance customer has not fled to the NHS. As a result, Cinven has had to pay £145 million for the same hospitals that cost £85 million less than three years ago.
Unlike the management team that it has inherited, Cinven probably does know what it is doing. This same Cinven sold General Healthcare Group, the largest private hospital group in the country, for £1,275 million in 2000, having put it together from other acquisitions between 1995 and 1997 at a cost of £759 million. The market seems to be taking the long-term view that with an aging population, private hospitals are a good market to be in. The NHS may wax and wane in its use of the private sector, but this can be seen as a ‘bed filler’ for private hospitals as long as the core business of private insurance remains strong. There is no reason to think that this will not be the case.
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