LONDON-Britain’s largest healthcare operator, Southern Cross Healthcare, plans to launch a euro 731.21-million ($922.89-million) flotation despite turbulent stock markets. Officials for the company, which runs 578 homes for the elderly and provides long-term care to people with physical and learning disabilities, plan to boost services, cut debt and bolster its acquisition firepower. The offer is expected to be priced by the end of June comprising a mix of new and existing shares.

“Southern Cross will be the largest care-home operator on the London exchange,” says non-executive chairman Bill Colvin. Since it was bought by the American private-equity firm Blackstone Capital Partners for euro 236.87 million ($298.94 million) in 2004, Southern Cross has expanded rapidly, tripling the number of homes it manages in an attempt to cash in on rising government healthcare spending and an aging UK population.

At the same time as the company offers a tranche of new shares, Blackstone plans to sell about half of its 88% stake in Southern Cross but will remain the company’s largest investor. The UK healthcare market is currently consolidating and Southern Cross intends to use the cash raised to expand via acquisitions. Last year it bought Highfield Care for euro 17.11 ($21.59 billion).

The government changed the financing of care in the mid-1990s by transferring funding for nursing homes to local councils. The local authorities ran out of money, care-home operators found themselves with too many empty beds and a number went bankrupt.

Now local authorities have better systems in place for funding nursing homes and the shake-out of the sector has brought supply into better balance with demand. The top players in the industry now have occupancy rates topping 90%. The biggest providers after Southern Cross are Bupa, Four Seasons Health Care and Barchester Healthcare. The closest listed rival, Care UK, is about a tenth of the size of Southern Cross.

Morgan Stanley and UBS have been appointed joint financial advisers, sponsors, global coordinators, bookrunners and lead managers for the Southern Cross offer.

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