CARE home giant Southern Cross is looking for a new buyer after private equity firm TowerBrook Capital Partners withdrew from takeover talks without making a bid.
The troubled Darlington company, which had initially rejected Towerbrook’s offer, said it has entered “highly preliminary” discussions with other companies which may be interested in making an offer to buy it out.
Southern Cross chief executive Jamie Buchan “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.”
The firm, which operates more than 700 sites, was initially approached by London-based Towerbrook in August after issuing a profits warning as councils began to rein in spending. Buchan said its fees in England last year rose an average of 1%, which is below inflation. Southern Cross’ share price has fallen by nearly 90% over the last year but news of Towerbrook’s interest sent its stock up by around 50%.
The company announced in August that its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the year would be around £53m, well down on last year’s £72.5m and beneath City expectations of £61m.
It has sold six freeholds, with a value of £31.4m, during the year and is discussing the sale of a further eight freehold
assets valued at £15.1m, with potential buyers.
UK government budget cuts threaten to further pressure the company’s top line, as 80% of its residents are funded by local authorities or the NHS.