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Connell C - LB Mar 2022

CareTech reaches £870m takeover agreement

AIM-listed social care and education services provider CareTech Holdings has agreed to be bought by a consortium led by its co-founders for £870.3 million.

The provider is valued to underlying EBITDA of 12.6x for the year ended 30 September 2021. CareTech shareholders will be entitled to receive 750p per share, representing a premium of about 23% to the stock’s last close on Friday.

Amalfi Bidco, the consortium created for the acquisition, includes Sheikh Holdings, set up by CareTech founders Haroon Sheikh and Farouq Sheikh, Belgravia Investments, Kensington Capital, and funds managed by THCS IV GP S.à r.l. and TH Management IV S.à r.l. as advised by THCP Advisory.

As reported by HealthInvestor, CareTech announced that the consortium had submitted an indicative £7.25 per share proposal on 30 March. DBAY Advisors on 1 April submitted a £7.50 per share cash offer for CareTech.

Farouq Sheikh said: “Both Haroon and myself as founders believe that our offer for CareTech is in the best interests of all stakeholders. As the management team who founded and grew this business, we believe that we are best placed to ensure long-term continuity of management and care for our service users.

“Shareholders will receive immediate value in the form of a significant premium to the share price before the offer was announced or the ability to co-invest with us for the long-term. Service users and customers can be assured that we will continue to run and invest in the business carefully, with consideration and respect for our service users.”

Founded in 1993, CareTech began trading on the AIM market of the London Stock Exchange in October 2005 under the ticker symbol CTH. According to its website, the group has more than 250 services across the UK supporting people with complex and challenging behaviours associated with autism, learning disabilities, mental health illness and neurological conditions.

The offer is expected to become effective in the third quarter, 2022.

Shares at the time of writing we’re up 21% at 739p.

Knight Frank advised CareTech and Candesic provided commercial due diligence. Ashurst acted as legal advisor to Sheikh Holdings and Bidco. Charles Russell Speechlys acted as legal advisor to CareTech. Proskauer Rose were legal advisor to THCP, while GSC Solicitors were legal advisor to Kensington and Belgravia. Deutsche Bank AG, London acted as financial advisor to Sheikh Holdings.

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