As workers wrestled on Monday evening with the thought of returning to the grind after the holiday weekend, businessman Dermot Desmond was already fully switched on.
The billionaire, who first committed to investing in Celtic football club in Glasgow in 1994, issued an astonishing statement to its supporters at 9.59pm, 15 minutes after it was announced that manager Brendan Rodgers was departing.
The normally media-shy 34.4 per cent Celtic shareholder accused Rodgers of having “contributed to a toxic atmosphere around the club and fuelled hostility towards members of the executive team and the board”.
It follows the manager’s complaints about a lack of summer player signings and no firm offer to extend his own contract.
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Rodgers’s final match was Sunday’s 3-1 defeat against Hearts, which left Celtic eight points from the summit of the Scottish Premiership.
“Celtic is greater than any one person,” concluded Desmond. “Our focus now is on restoring harmony, strengthening the squad, and continuing to build a club worthy of its values, traditions, and supporters.”
But Celtic wasn’t the only commercial matter on Desmond’s mind as the weekend drew to a close. That same evening, confirmation came that another 1994 investment had paid off. And in spectacular fashion.
Listed US healthcare property group Welltower announced that it was acquiring the portfolio of the Barchester Healthcare nursing home group in the UK, which is mainly owned by Desmond and fellow Irish billionaires – and one-time shareholders in Manchester United – JP McManus and John Magnier, for £5.2 billion (€5.96 billion).
The price for the second-largest UK care homes group was well in excess of the £4 billion-plus figure that had been rumoured last week, when it first emerged that Welltower, valued at more than $120 billion (€103 billion) on the New York Stock Exchange, was close to agreeing a deal.
It was also 60 per cent higher than the £2.5 billion price that the trio had agreed to sell Barchester to Macquarie for in 2019, before the Australian financial giant pulled out, blaming uncertainty caused by Brexit. Welltower had been involved earlier in that sale process.
The portfolio comprises about 15,000 beds across 263 homes, of which 111 are managed on a type of contract where the owner of the property shares the operating income from the underlying homes. A further 152 so-called triple-net lease properties see the operator paying the lease and any operating expenses. Another 21 homes are being developed.
The Barchester group is made up of two main companies owned by common shareholders: the operating company, Barchester Healthcare; and an entity that owns most of the underlying homes, Limecay Ltd. It is understood from sources close to the major shareholders that they have fully divested their interests.
Barchester’s current executive and management team will stay in place post-acquisition. However, the future ownership of the operating company is not yet clear.
Almost all of the value of the deal will go to the shareholders, as Barchester and Limecay each now have little underlying debt when intergroup loans are stripped out – in stark contrast to the group’s financial standing 13 years ago, when it was highly indebted and faced refinancing risks.
Barchester owed £103.6 million to related parties and had £366.4 million of external loans at the end of last year, according to its latest accounts filed recently with Companies House, London.
Limecay has £1.09 billion of loan notes issued to its parent company in the British Virgin Islands. These are due for repayment at the end of 2027, its most recent accounts state. Loan notes can be a tax-efficient way to structure investments.
While Magnier (77), the racehorse magnate behind the Coolmore stud in Co Tipperary, financier Desmond (75), and McManus (74), the racehorse owner and investor who started off as a bookmaker, are known to be by far the biggest shareholders, the breakdown is kept away from prying eyes by the fact that Barchester is owned by a vehicle called Grove Ltd in Jersey, where ownership registers are not public.
Limecay’s parent is based in the British Virgin Islands, where shareholders are also not public.
Derrick Smith, part owner of the Coolmore Stud racehorse breeding business with Magnier, also has a stake, sources previously said. Former Kerry Group chief executive and Barchester’s one-time chairman Denis Brosnan was also among shareholders in the past, though it is not known whether he continues to be.
The deal comes amid a flurry of activity in the UK nursing homes market. The sector attracted record-high investment volumes of £4 billion in the 12 months to July, driven by consistent demand due to the country’s ageing population, according to real estate agency Cushman & Wakefield.
Some 70 per cent of the value of deals stemmed from investors in the US, where consolidation of the care homes market is more advanced.
“Given the significant, non-purpose built stock and negative net supply growth over the last 10 years in the UK, we are ecstatic about the significant growth opportunity embedded within this portfolio,” Nikhil Chaudhri, Welltower’s co-president and chief investment officer, said on a call with analysts on Tuesday.
But while occupancy levels are high, the industry has been facing cost headwinds in recent years, including an increase in the UK minimum wage in April, according to sector commentators.
Barchester was founded in 1992 by Mike Parsons, a former chief operating officer of UK advertising agency Saatchi & Saatchi, after discovering how difficult it was to find a good quality care home for two elderly great-aunts in need of nursing care.
He started off by buying Moreton Hill, a listed 17th-century farmhouse in the Cotswolds in southwest England, which he converted into a care home with backing from Bank of Ireland. McManus, Magnier and Desmond came on board as equity investors in 1994 as Parsons set about expanding the business.
Their investment tells the story of what patient, long-term capital can achieve.
With Brosnan – who has had a long history of investment collaboration with the trio – installed as early chairman, Barchester initially pursued a series of small acquisitions.
“We wouldn’t buy just anything. We’d only buy good quality companies. They were normally smaller, regional companies that had been set up by a family,” Parsons said in a podcast recorded in 2023. “We developed a reputation for being a decent company to deal with.”
In 2004, the group completed the transformational, £525 million purchase of rival Westminster Healthcare – a bigger deal than anything Brosnan had carried out during his three decades with Kerry. It left the merged business with 10,000 beds across 163 locations – making it the third-largest private player in the sector in the UK.
Both companies were focused at the high end of the sector, mainly attracting patients paying with their own money. “We have also paid [our workforce] ahead of the game,” Parsons, who stepped down as CEO but remained a board member of Grove, said on the podcast.
The ultimate plan at the time was to float the combined group on the stock market in the future, when the company was large enough to be valued near or above the £1 billion mark.
However, two years later, the investors decided to use buoyant credit markets – and a hot trend in certain sectors of splitting companies into operating companies and property companies (opcos and propcos) – to take money off the table.
It saw the properties hived off into what is now known as Limecay and £1 billion being raised through a debt refinancing, organised by Royal Bank of Scotland (now NatWest) – about half of which was returned to investors.
The deal was reported at the time to have left Magnier, McManus and Desmond with a 100 per cent return on their initial investments.
It was far from their only collaboration. Some or all of Magnier, McManus, Desmond and Brosnan have come together on a number of deals over the past three decades – a history of partnerships that has led sections of the international press to dub them the “Irish mafia”. Some have been more successful than others.
In 1998, the main trio acquired the Sandy Lane luxury resort in Barbados for £38 million, before going on to reportedly spend scores of millions redeveloping the property.
That same year, the four backed former UK tennis player David Lloyd and his son Scott as they went about setting up a gym chain called Next Generation – as a non-compete clause expired after the 1995 sale of his eponymous David Lloyd fitness clubs (in which some of the Irish gang had previously been invested).
The business, in which the Irish investors would ultimately end up with a 60 per cent stake, ended up being sold in two parts between 2006 and 2007 in deals worth a total of about £235 million, including debt.
Between 2001 and 2004, Magnier and McManus built up a 28.9 per cent stake in Manchester United through a Virgin Islands-registered vehicle, Cubic Expression. They are said to have made a €125 million profit when US billionaire Malcolm Glazer bought their holding in 2005 to take control of the club.
Magnier built up a stake in Scottish sausage skins maker Devro in 2003 through his Swiss investment vehicle Acomita and joined forces with Brosnan to make a £242 million takeover bid in 2007. However, they pulled the offer that April, after failing to reach agreement on the long-term security of the company’s pension scheme.
Brosnan’s Geneva-based Lydian Capital Partners private equity firm, in which Magnier, McManus and Desmond are investors, bought another UK care homes business, called Castlebeck, in 2006 for £255 million. It succumbed to administration in 2013, as its debt became unsustainable, and was ultimately bought out by another healthcare provider, Danshell, saving 22 homes and 2,000 jobs.
Lydian also backed Global Radio, a business set up in 2007 and fronted by former ITV chief executive Charles Allen to acquire a bunch of UK radio stations, including Heart, LBC and Capital.
That same year, Lydian ventured into the US healthcare market by acquiring Trilogy Health Services, an operator of nursing homes and senior living centres in a $350 million deal. It would go on to be sold in 2015 to Griffin-American Healthcare REIT III in a transaction valued at $1.125 billion.
Also in 2007, Magnier and McManus started stake building in UK pubs group Mitchells & Butlers. Their Elpida vehicle owns about 23.5 per cent of the business, which has had its ups and downs since then.
Back at Barchester, the 2006 debt refinancing would leave the group highly exposed when the global financial crisis struck two years later.
By 2012, the group was essentially in negative equity as £970 million of debt and associated interest and inflation rate swaps, which were £460 million out of the money, eclipsed the £1.2 billion reported value of its property portfolio.
Goldman Sachs was brought in at that stage to help structure a refinancing – around the same time that another UK care centres group, Southern Cross, was collapsing under the weight of its own debt, and Four Seasons Health Care, then the largest player in the UK, was taken over by private equity firm Terra Firma in a rescue deal.
Barchester ended up carrying out a sale and leaseback of some of its homes in late 2013 with a company called Ravenshill International – allowing it to repay its pre-existing debt in full. Ravenshill was reported at the time to be linked to Barchester’s shareholders, but this was never confirmed.
Welltower said on Monday that the Barchester portfolio “is positioned for significant future growth with current blended portfolio occupancy in the high 70 per cents”. The US group announced a total of $14 billion of acquisitions that day, including the purchase of Barchester rival HC-One’s equity for £1.2 billion.
Welltower said it expects to generate a “low double-digit” percentage annual internal rate of return (IRR) on its Barchester investment.
Desmond, with his headache at Celtic, will not be alone in welcoming the timing of the deal. It’s only been six weeks since Magnier lost a high-profile High Court case to buy the 751-acre Barne Estate in Co Tipperary.
