Residential care provider CareTech – which has operations in the West Midlands – has agreed to acquire Valeo, a company which specialises in services for adults with learning difficulties, in a £15.3 million deal including £11 million in cash.
CareTech confirmed the acquisition comes with the assumption of £500,000 liabilities and £1 million by the issue of 200,000 ordinary shares at 500p each, in addition to a deferred consideration of up to £2.8 million payable subject to certain performance targets being met in the future.
The announcement was made at the same time as CareTech said its pre-tax profit for the first-half to the end of March came in at £3.82 million up from £2.42 million as turnover increased by 24 per cent to £30.7 million.
CareTech announced an interim dividend of slightly over 1p a share.
The company, founded in 1993, was wholly owned by its management before flotation in 2005, and has 141 residential care homes and five day centres mainly located in the West Midlands and the south of England.
The company will place more than 7.14 million new ordinary shares at 420p each to repay some of its revolving credit facility and finance further growth.
Valeo’s ten care homes, located in Yorkshire with a capacity of 71 beds, will be integrated into CareTech’s Midland region and could form a platform for a fourth region, covering the highly populated M62 corridor and proving a slight increase in margins.
Broker Brewin Dolphin, which has arranged the placement of the new ordinary shares, said the interims were strong and put CareTech within touching distance of its previously stated target of 1,500 beds, augmented in 2008 by a positive momentum and sourcing bolt-on acquisitions.
The broker said separate fund raising would provide further “firepower” for potential acquisitions and the placing being undertaken at a narrow discount was a positive endorsement.
The placing price has a discount of 3.4 per cent on the mid-market closing price of 435p on June 17. A company spokesman said the business had made a successful start to the 2008 with organic growth again ahead of market expectations and it was confident about future prospects.
The UK market for the supply of care services for adults and children with learning disabilities and mental illness was estimated to have been worth over £6 billion in 2007.
Of that figure £4 billion was accounted for by independent providers which includes CareTech.
CareTech, with a £53 million turnover up to the year ended 30 September, has an estimated 1.33 per cent share of the market which is highly fragmented.
The largest operator is providing about 2.8 per cent of places for adults and children with learning disabilities.
The CareTech business is one of a small number of larger operators, many of whom are operating under private equity ownership.
Almost 100 per cent of adults with learning disabilities or mental illness who receive long-term care in homes or supported housing are funded by the public sector.