3i Backs Management Buyout of Care Principles in £90m deal

01 Apr 2005

3i, Europe's leading private equity company, announces today that it has led the management buyout of Care Principles, a leading specialist care provider for adults with learning disabilities.

3i has been an investor in Care Principles since 1997, when a team of managers out of General Healthcare approached them to build and run medium secure hospitals. 3i invested £1.5m at the time for a 38% stake in the business. With the support of 3i, the business has grown strongly, with turnover increasing to £50m. They have now agreed terms for 3i and funds managed by 3i to buy the founders' stakes and are pleased to have the opportunity to re-invest in the business and increase their stake to a majority 85%.

Paul Preston, former MD of General Healthcare Group's BMI Hospitals has been appointed CEO of the group, and Nick Irens, former Chairman of Westminster Healthcare will take the post of Chairman. The core executive team will remain in their roles as CFO, COO and Clinical Director.

Care Principles is a niche business operating 300 secure beds in five regions across England. The homes provide intensive care for patients requiring long term therapy and treatment for adults with severe learning disabilities and mental health problems. All patients are sectioned under the Mental Health Act and receive rehabilitation through a combination of nurses and carers with a typical staff to patient ratio of four to one. The average length of stay for an individual is approximately four years.

Stephen Keating, 3i Director commented: "Working with the first class management team that we now have in place we intend to grow the business further into a broad specialist healthcare business operating in a number of mental health markets. Our history with Care Principles combined with our knowledge of the industry from past investments affords us the ability to spot opportunities and take a rigorous approach to aspects of the business."

In December 2004 3i realised four times its initial investment in Westminster Healthcare, the nursing home operator, and has in recent years successfully realised investments in Castlebeck, Caretech and Milbury (Paragon), other healthcare providers for adults with learning difficulties. As such it is known to have been looking to reinvest some of its proceeds from these highly profitable deals into other healthcare businesses.

Paul Preston added: "It is an exciting time to be involved in healthcare. As independent provision becomes an increasingly important component of most healthcare economies there is a fabulous opportunity to bring extra capacity and innovation to market. This creates a great opportunity for private equity companies to support this growth across a number of areas. Together with 3i I am looking forward to steering Care Principle's ambitious growth strategy."

Banking was arranged by RBS and AIB. 3i was advised on the deal by Macfarlanes and Deloitte carried out the financial due diligence.

Notes to editors

About 3i
3i is a world leader in private equity and venture capital. We focus on Buyouts, Growth Capital and Venture Capital and invest across Europe, in the United States and in Asia Pacific.  Our competitive advantage comes from our international network and the strength and breadth of our relationships in business. These underpin the value that we deliver to our portfolio and to our shareholders.

3i has bought into healthcare companies since the early 1980s and to date has conducted over 200 investments in this sector.  Some of these include: German pharmaceutical company Betapharm in a €300m growth MBO; UK's PD Services a £3.75m start-up and a £26m management buyout/buy-in of Green Corns Ltd.

3i Buyout Business
The 3i European Buyout Business is a leader in the European mid-market. Managing over €3.5bn invested in over 100 companies across Europe, the business invests in all sectors, with a particular focus on media, healthcare and business support services. Some recent investments include Keolis - France - €540m - passenger transport, Betapharm - Germany - €300m - pharmaceuticals, Hobbs - UK - €158m - women's fashion retailer. Some recent successful exits include Westminster Healthcare - UK - €751m, Ben Sherman - UK fashion retailer - €114m and Pinewood Shepperton flotation - UK - €75m, Travelex - UK foreign exchange services - £1bn transaction.