£125m pay day for racing tycoons

By Lauren Mills, Mail on Sunday Senior Financial Correspondent
Updated: 03:01 EDT, 27 June 2006

IRISH horseracing tycoons John Magnier, JP McManus and Dermot Desmond are set to double their money on a bet on nursing homes.

Between them, the billionaires own 51% of Barchester Healthcare, Britain's fourth-biggest care home operator, which is set to raise £1bn in a refinancing that will see the company split in two.

Royal Bank of Scotland is leading a consortium of banks that will provide £1bn of debt funding to Barchester. Half will be used to restructure debt, while £500m will be returned to the group's equity investors, who also include chief executive Mike Parsons and Denis Brosnan, the chairman and former boss of Irish food giant Kerry Foods.

Magnier, McManus and Desmond invested in Barchester in 1994, a year after the company was set up by Parsons. The Irishmen will share £125m, roughly double their original investment. This will be the latest success for the trio, who have been involved in a string of high-profile business successes.

In 1997, McManus, along with Desmond, bought the Sandy Lane resort in Barbados for £38m. McManus and Magnier later went on to become major investors in Manchester United Football Club.

Barchester runs 172 care homes in England, Scotland and Wales, providing residential care to 10,000 people who each pay £650 a week.

The company generates annual revenues of £350m and is expected to increase profits by £20m to £90m this year.

The restructuring will see Barchester split into two separate companies, one focusing on operating the business, the other a property holding company.

Parsons said: 'We looked at the possibility of a stock market flotation, but felt it was not for us at the moment. The shareholders have no desire to sell. The market conditions in the City are not right.'

Parsons added that the company was still looking for takeovers after its 2004 purchase of Westminster Healthcare for £525m.

'We have sufficient funding to buy other care homes, such as small regional companies offering the same sort of quality,' he said.

The company, which claims to offer a premium service to its clients, is also spending more than £35m developing an additional 1,100 beds across 30 sites.

While the nursing home sector has been growing in popularity with investors, Southern Cross Healthcare Group, Britain's biggest care homes operator, was forced to abandon a planned £550m listing earlier this month because of turbulent stock markets.