Southern Cross group looks set for takeover

Britain's largest care-home company could be set for a takeover bid by private equity firm Blackstone, according to reports.

Southern Cross Healthcare was listed by the US buyout firm four years ago but is the subject of new takeover talk after another private equity house, Towerbrook Capital, walked away from a proposed deal last week.

The care group has around 750 nursing homes throughout the UK, including more than 50 in Scotland, but was forced to issue a profit warning in August as local authorities cut their spending on care homes.

London-based Towerbrook pulled out of talks without making a bid, but Southern Cross - which recorded a pre-tax loss of 23 million for the half year ending in March - said last week that it was in preliminary talks with other potential buyers.

Jamie Buchan, chief executive of Southern Cross, said there was still interest from various parties that the group was looking into.

"There is significant potential in the business, we've said that consistently, and to fulfil the ambition and potential of the business, access to fresh capital is one of the dimensions of that."

Blackstone previously bought Darlington-based Southern Cross in 2004 before listing it two years later, but is believed to be considering a new takeover of the group and its property company with a view to possibly merging the two.

Southern Cross is one of several care home groups struggling to secure offers as private equity firms grow increasingly concerned about the impact on the sector of the government's spending cuts. Around eight in ten of the 33,000 Southern Cross residents are funded by local authorities or the NHS, according to Buchan.

Talks between the Priory Group and Bain Capital also collapsed recently, with the auction for the RBS-owned Priory now reopened to new bidders. RBS inherited the clinic group on acquiring Netherlands-based bank ABN Amro in 2007.