Goldsborough begins homes sale

Part disposal of nursing home portfolio and cash bid for Quality Care herald consolidation of the sector

Goldsborough Healthcare, the nursing home group which last summer fought off a pounds 77m bid from the UK's second-largest operator, Westminster Healthcare, is selling half its nursing home portfolio. A leak of the news, which forced Goldsborough to issue a statement to the Stock Exchange late yesterday, came on the same day as a US group confirmed it was buying the UK nursing home operator Quality Care Homes for pounds 46.3m cash.

Both deals are evidence of rapid restructuring and consolidation in a sector plagued by profit warnings and depressed share prices, analysts claim. The bid for Quality Care by US investment group Principal Healthcare leaves just seven nursing home players quoted on the UK stock market compared to 13 less than a year ago.

Andrew Richmond, a healthcare analyst from Collins Stewart, said: "I have been saying since 1995 that we'll see takeovers emerging in this industry."

Pat Carter, chief executive of Westminster Healthcare, said he thought there would be just a handful of major players left in the market in a few years.

The trouble with nursing homes, said analysts, was that too many companies tried to build too many homes in the 1980s, driven by exciting projections of growth in the number of elderly people needing professional care. At the time there was plenty of government money to pay for care, which led to explosive growth in the number of nursing homes.

However the honeymoon ended when local authorities were given control of nursing home funding in the early 1990s. Cash for admissions dried up and the number of occupied nursing home beds fell. With high fixed costs, the operators' profits came under pressure and share prices fell.

The difficulty of the sector was one reason that Goldsborough was exiting from nursing homes, said observers. The company has gradually reduced its dependence on homes, now around half of total profits compared 77 per cent at flotation in 1994, favouring instead its more predictable home care and hospitals businesses.

"They had taken the nursing home side as far as they could," said one top industry boss. "They needed the cash to do something else."

Goldsborough, which owns around 31 nursing homes, said it was in early talks to sell some homes. However it is thought to be selling 13, five in London and eight in the Midlands, through estate agents Chestertons.

Buyers are likely to be from the unquoted sector. Goldsborough is thought to want to use the cash to buy private homecare business Allied Medicare, which owns 65 outlets. Though the group says it expects to sell its portfolio for asset value, observers worry that with its intentions now known, bidders seeing a forced sale are in a strong position to offer a lower price.

Meanwhile US operators attracted by the low valuations in the sector and maturity of their own market have been moving into the UK. Sun Healthcare has snapped up two quoted UK players, Apta and Ashbourne, in the past 12 months.

Observers see the move by Principal as the next stage. Principal will own Quality Care's 2,256 beds, but will not operate them, leasing most of them out to quoted UK tiddler Tamaris.

Chai Patel, chief executive of the UK's biggest quoted player, Care First, said: "There is a clear separation between the owners and operators of nursing homes in the USA, but not here. These deals allow operators to expand the number of homes they have without resorting to the City or banks. I think there will be much more of this kind of financing in the future."