Britain’s biggest builder of retirement homes could fall into the hands of an overseas private equity firm, sparking concerns over the treatment of thousands of elderly residents.
After pulling out of the race to buy Asda, American buy-out firm Lone Star is closing in on a deal for McCarthy & Stone for £630million.
The offer of £1.15 a share is a premium of 39 per cent on Thursday’s price of 83p, and the stock rose again – by 39.5 per cent or 32.8p to 115.8p – yesterday.
After pulling out of the race to buy Asda, American buy-out firm Lone Star is closing in on a deal for retirement homes operator McCarthy & Stone for £630m
Bosses at the Bournemouth builder recommend investors back the bid, which is the latest attempt by a foreign investor to capitalise on the bombed-out share price of British companies.
If it goes ahead, it will herald a big pay day for New York firm Anchorage Capital Group, and blue-chip British firms including Royal London, Aberdeen Standard Life Investments and M&G.
Anchorage, the biggest shareholder with 17.1 per cent, would scoop around £107million.
McCarthy & Stone chief executive John Tonkiss is in line for £680,000 for his 0.11 per cent stake. Its chairman, Paul Lester, said it was a ‘compelling and attractive opportunity’.
Lone Star Europe president Donald Quintin said it ‘represents an attractive opportunity in a market underpinned by clear fundamentals: a rapidly ageing population and a structural undersupply of suitable housing for older people’.
But not everyone was so enthusiastic. The builder has a chequered track record and has been accused repeatedly of overcharging residents.
Baroness Altmann, former pensions minister, who also served as director general of private equity-backed over-50s group Saga, was concerned for residents, given that private equity firms have been criticised for debt-fuelled takeovers, cutting costs and service, and increasing charges before selling the business on.
Altmann said: ‘It’s important to make sure any company selling retirement homes does not leave those buying them and their families with properties they cannot sell because of excessive charges.
Charges need to be fair and transparent. In the past the biggest problems have arisen when companies are taken over with large levels of debt – that has often led to poor value for customers.’
McCarthy & Stone mainly sells flats in developments around the country. These include assisted living for the over-70s, and flats for people over 55. Around 20,000 older people live in these homes, paying a service fee.
A source close to the deal insisted it was not loaded with debt, and that service charges would not be ramped up.
McCarthy & Stone only returned to the stock market in a £1billion float five years ago, a remarkable comeback after it almost collapsed during the financial crisis.
It was taken off the market in 2006 in a £1.1billion bid by a consortium led by HBOS, a deal brokered by Peter Cummings, the disgraced former head of corporate lending at HBOS, who would later be banned from the industry for life.
In the 2008 crisis, its lenders took control. Lloyds, which owned HBOS, was left with 25 per cent which it sold to private equity firm TPG and Goldman Sachs.