Terra Firma agrees 825 million pounds Four Seasons deal

LONDON (Reuters) - Private equity group Terra Firma TERA.UL is to buy Britain's biggest care home operator Four Seasons Health Care in a deal worth 825 million pounds, hoping to benefit from the long-term growth market in care for the elderly.

The deal will mark a reprieve for Four Seasons, some 40 percent owned by Royal Bank of Scotland (RBS.L), which has been looking to refinance some 780 million pounds of debt before a September repayment deadline.

The deal is expected to close on or before July 16, at which point all Four Seasons' liabilities will be repaid in full. Terra Firma, the private equity group founded by Guy Hands, is backing its deal with a new, smaller debt package, being arranged by Goldman Sachs (GS.N) and Barclays (BARC.L).

Four Seasons is the largest independent health care provider in a 15 billion pound British market, operating 445 care homes, and 61 specialist care centres.

Private equity's activities in the health care sector have come under intense scrutiny since the collapse of Southern Cross, a listed group that had been previously owned by Blackstone.

But unlike Southern Cross, which collapsed because of its inability to meet a crippling rental bill on a largely leased estate of homes, Four Seasons owns around 60 percent of its homes limiting its exposure to rental costs, Terra Firma said.

Not only did Four Seasons take over the mantle of Britain's largest care home group from Southern Cross, it acquired some 140 of its failed rival's homes.

Despite the public and political controversy in the sector, the requirement for elderly and specialist care provision is forecast to grow annually by 3.1 percent over the next 10 years driven by the needs of a growing elderly population, Terra Firma said.

Most of this need will be met by the independent sector offering services that complement the National Health Service.

Four Seasons was advised by Rothschild ROT.UL, Gleacher Shacklock and Deutsche Bank (DBKGn.DE). Terra Firma was advised by Barclays (BARC.L) and Goldman Sachs (GS.N).

(Reporting by Simon Meads and Stephen Mangan; Editing by Eric Meijer and Jane Merriman)