Terra Firma close to sealing a £825m deal to acquire Four Seasons Health Care

UPDATE: Terra Firma confirms media reports and reveals GBP825m deal to acquire Four Seasons Health Care Ltd. Previous version follows:

UK private equity firm Terra Firma Capital Partners Ltd is nearing an agreement for the acquisition of Four Seasons Health Care Ltd, the biggest UK care homes operator, according to a report in the Financial Times.

The transaction would give Four Seasons an enterprise value of GBP825m (USD1.3bn/EUR1bn) and the parties could announce an agreement this week, the newspaper said.

Four Seasons is faced with a September deadline to refinance net debts of GBP780m. The company confirmed earlier in April that it was holding talks with investors as part of its efforts to strike a refinancing deal.

According to a source familiar with the matter, Terra Firma will supply some GBP300m in equity and Four Seasons is likely to raise new debt of around GBP25m.

The care homes operator narrowly escaped a forced sale in 2009 as it struggled with a heavy debt burden. However, it managed to agree a debt-for-equity swap with its lenders, which put Royal Bank of Scotland Group plc (LON:RBS) in control of the business, the FT went on to add. The deal reduced Four Seasons’ GBP1.6bn debt by half. In 2010, the company negotiated a two-year extension to the maturity date.

Four Seasons, which has appointed Rothschild and Gleacher Shacklock as advisers, wants to strike a deal with investors and creditors in May and finalise it by July.

For Terra Firma, it would be the second UK acquisition involving a company taken over by its lenders through the exchange of debt for equity. In March, the private equity group sealed a GBP276m deal for The Garden Centre Group.