Terra Firma Capital Partners, a private equity firm, has agreed to buy Four Seasons Health Care for £825m as Terra eyes cashing in on the growing need for elderly and specialist care provision among the UK's ageing population.
Four Seasons, Britain's largest private care home operator, is not exposed to the same high rental costs that sank its rival Southern Cross and Terra Firma has cleared much of the company's debts with an injection of equity.
This has "brought stability to the company" said Guy Hands, chairman and chief investment officer of Terra Firma.
"Terra Firma is committed to further investment in the business in order to achieve long-term sustainable growth," he added.
Four Seasons operates 445 care homes with 22,364 beds, and 61 specialist care centres with 1,601 beds and in 2011 it made £100m profit
It owns 60 percent of its care homes, limiting the company's rental costs on its facilities and so avoiding a similar situation to Southern Cross, which collapsed when it could not afford its rental costs.
The company bought some former Southern Cross homes when it went bust.
UK requirements for elderly and specialist care provision is forecast to grow annually by 3.1 percent for a decade because of the country's ageing population.
The deal will be complete on 16 July when all existing debt liabilities of Four Seasons will be discharged.
Terra Firma's £825m will be financed with both equity and new debt. The debt being arranged by Goldman Sachs and Barclays.
RBS owns around 40 percent of Four Seasons and will keep its stake in the deal.
"We are delighted that we have secured a long term sustainable capital structure for Four Seasons and to be reinvesting alongside Terra Firma," John Davison, head of RBS Strategic Investments Group, said in a statement released with the deal.
"By significantly reducing the current debt, the management team of Four Seasons can continue to concentrate on delivering the high quality care and service for which they are rightly so well regarded."