Canada's CPPIB acquires minority stake in France's Orpea

TORONTO Wed Dec 11, 2013 7:50pm EST

TORONTO Dec 11 (Reuters) - Canada Pension Plan Investment Board (CPPIB) said on Tuesday it has invested 320.8 million euro ($442.4 million) to acquire a 15 percent stake in nursing home operator Orpea as it bets on the French company's growth prospects in Europe and overseas.

CPPIB, one of Canada's top pension fund managers with over C$192.8 billion ($181.70 billion) in assets under management, is buying the shares from Orpea's founder Jean-Claude Marian and Santé Finance et Investissement.

The pension fund has also agreed to underwrite a 100 million euro equity issue by Orpea. The care home operator, which plans to expand into China and other markets, intends to use proceeds from the offering to fund its international growth program.

"We are de-risking the deal for the company and that speaks to our conviction around the company's growth opportunities and our desire to back them by providing capital beyond just buying a part of the founder' stake," said Scott Lawrence, the head of Relationship Investments at CPPIB, in an interview.

In April, Orpea outlined plans to expand into China - its first market outside Europe - to capitalize on the needs of an ageing population expected to boom in the coming decades. At the time, Orpea said it was creating a Chinese division in order to start building nursing homes in major cities like Shanghai and Beijing.

Orpea has been seeking to expand abroad in recent years as legislation has made it harder to obtain authorization to set up new homes in its domestic market, which already has significant and varied provisions for the elderly.

Lawrence said the deal came together following active talks with Marian's advisors over the last few months. Marian, who is keeping an 8 percent stake in the company, will continue in his role as chairman of the company's board.

Founded in 1989, Orpea operates some 339 facilities in France - where it competes with Medica, Le Noble Age and Korian - and about 92 centers in Spain, Italy, Belgium and Switzerland. It is one of Europe's leading providers of skilled nursing, post-acute care, rehabilitation and psychiatric services.

"We are very careful about picking long-term partners and in this specific niche, Orpea's our horse and we will do everything we can to foster their growth and support them," said Lawrence. "You won't see us making a bunch of different investments around the world to compete with Orpea, as they're the group we will be devoting resources toward."