Nordic Capital Fund VIII swallows German operator Alloheim

Swedish buyout group Nordic Capital is buying Alloheim, Germany’s second-largest nursing home operator, for about €1.1 billion including debt, from the Carlyle Group. Nordic Capital said it intended to support Alloheim’s management and to invest in further expanding the company’s facilities and services.

The sale followed a competitive auction process, which included bidders the French group DomusVi, backed by International Capital Group, as well as buyout groups Ares from the US and Chinese group Fosun.

Carlyle bought Alloheim from Star Capital in 2013, and has since added to the business with a number of acquisition bolt-ons. Alloheim, founded in 1973, employs 14,500 in operating 165 nursing homes with 20,000 residents across Germany (up from 49 houses and 6,000 beds when Carlyle bought the business). Two years ago it took over its competitor Senator with its 48 senior residences, and competitors AGO and Senterra. Alloheim is the owner of about 10% of the underlying real estate.

The latest deal values Alloheim at about 12.5 times its €88m in EBITDA earnings expected for 2017. It follows a series of similar deals in the German market, including the sale of French rival DomusVi and Germany’s Casa Reha and German clinic chain Schoen. The German healthcare sector has also witnessed a number of prominent deals this year, including the sale of generics group Stada to private equity firms Bain and Cinven.

(REFIRE reported about the significant new joint venture collaboration between Germany's AviaRent and French group Primonial, to expand both companies' investment in European social infrastructure, including managed-care homes.)

Unusually, a total of nine banks are lining up to provide finance to the Jersey-registered Nordic Capital Fund VIII for the Alloheim deal with debt packages of about 6.5 times core earnings, which could include senior and subordinated loans and bonds or all senior loans, according to a report by Reuters in London. The financing is made up of a €500m term loan, a €125m second-tier loan, and a €100m revolving credit facility.

According to the report, Barclays, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Mizuho, SEB and SMBC have underwritten the financing that is set to launch for syndication to investors in the new year. Normally a deal of this size would attract a maximum of three or four banks, but Nordic Capital has a history of preferring to work with a larger number of banks (most of whom, inevitably, are likely to have to settle for a lower-than-normal fee). The Nordic Capital Fund VIII was set up in 2013 and has equity capital of about €3.5bn, with about half coming from North American investors, and a quarter each from the Middle East/Asia and from Europe.

Separately, news from Belgian group Cofinimmo is that it too is expanding its investment base in the German nursing home sector. It has just bought two nursing homes for €26.5m, and bringing its investment in the sector up to €94.5m for this year.

The first asset, the Gelsenkirchen Bismarckpark, was built in 1998 and cost €11.4m. To meet North Rhine-Westphalia's required standards, the property has to be refurbished for about €1.0m to transform double rooms into single rooms, when it will then have 109 beds. The 6,466 sqm property is operated by Curanum AG München, a subsidiary of the Korian Group, with which Cofinimmo signed a 'double net' lease for a fixed 17 years, with an option to extend for ten years. The initial gross rental yield is 6.2%.

The second asset is the 'Azurit Seniorenzentrum Riesa' between Leipzig and Dresden, currently under construction, and bought for €15.1m, on an initial gross yield of 5.7%. On 6,450 sqm, the property will have 138 beds and is being let to operator Azurit Rohr GmbH under a 'double net' lease for a period of 25 years, with an option for an additional 5 year extension. Both leases are indexed to the German consumer price index.