Spire Healthcare seeks flotation to fund expansion

The group runs 39 hospitals and 13 clinics including the Spire Murrayfield Hospital in Edinburgh. Picture: Nigel Darling
The group runs 39 hospitals and 13 clinics including the Spire Murrayfield Hospital in Edinburgh. Picture: Nigel Darling
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SPIRE Healthcare is to seek a London public listing in a move set to value the UK’s second- 
biggest chain of private hospitals at about £1 billion.

The group, whose 39 hospitals and 13 clinics includes the Spire Murrayfield Hospital in Edinburgh, said it planned to raise £315 million in new equity that it will use to pay down debt and bankroll expansion.

Private equity group Cinven created Spire through its purchase in 2007 of the hospital business of private healthcare group Bupa for an enterprise value of £1.4bn.

Since then Cinven has not taken money out of the company, and Spire chief executive Rob Roger said yesterday that the private equity group planned to keep a substantial holding in the floated business.

Roger said Spire, which employs 7,000 staff, planned to launch two regional hospitals by 2017, another two in London farther down the line, as well as four more radiotherapy centres.

The business had core earnings of £154.1m in 2013 after rental costs, and will be carrying debt of just under £500m after its listing.

The chain refinanced its loan facilities in 2013 with a sale and leaseback of 12 of its hospitals, raising about £700m.

Spire is likely to be one of the last companies to seek a flotation before the traditionally quiet summer period, analysts said.

Proceeds from UK flotations have more than tripled this year as companies have sought to capitalise on firm stock markets and private equity funds cash in on their investments.

More than half of Spire’s revenue comes from private medical insurance. Healthcare data provider Laing and Buisson said that market shrank by almost 8 per cent during the 2008/09 
recession, and has recovered only slowly. However, less than 11 per cent of the UK population were medically privately insured at the beginning of 2013, the lowest penetration in two decades.

Spire, which will be the only private hospital operator listed on the London Stock Exchange, is targeting an increasingly cash-strapped public health service. Roger said the UK private hospital market was worth £4.6bn last year.

The sector was investigated by the Competition Commission recently, but Spire was cleared 
of anti-competitive behaviour. Rivals HCA and BMI were ordered to sell nine hospitals amid concerns over a lack of competition and inflated pricing.

Spire said it aimed to achieve a “free float” of readily tradeable shares of at least 25 per cent of its equity.

JP Morgan, Bank of America Merrill Lynch and Morgan Stanley are joint global coordinators.