Hospital Giant Poised To Kick Off £1.5bn Float

One of Britain's biggest private hospital operators is poised to press the button on a £1.5bn stock market listing despite concerns that it is facing a spending squeeze from one of its biggest customers.

Sky News understands that Spire Healthcare has pencilled in an announcement of a flotation on the London Stock Exchange (Other OTC: LDNXF - news) for next week, the latest in a deluge of public share sales this year.

A final decision about the timing of a float has yet to be taken, insiders said on Wednesday.

Spire (Stuttgart: SIZ.SG - news) , which employs nearly 8,000 people, has been owned by Cinven, a buyout firm, since it was formed from the purchase of Bupa's hospitals business in 2007.

Cinven turned its attention to an initial public offering (IPO) of Spire after a sale process failed to attract bids which met the company's valuation.

Some potential buyers are understood to have been deterred by the prospect of price cuts being imposed by clients including Bupa, Spire's former owner.

A recent inquiry by competition regulators found no evidence of anti-competitive behaviour at Spire, which operates more than 35 hospitals across the UK.

It did, however, impose forced disposals on a number of other major players, and sparked criticism of fees from major hospital customers after concluding that BMI Healthcare, HCA International and Spire had overcharged customers by as much as £174m annually between 2009 and 2011.

At a recent British Medical Association conference, a senior Bupa executive said it would be looking to reduce fees by 15% when current contracts expire.

Damien Marmion said some hospital groups were making “excessive profits at the expense of customers” and that reducing fees was “an absolute priority” for Bupa.

“We will use these reductions to give hard-pressed customers better value from private healthcare and to grow the market, for the benefit of all participants in the market," he told the conference.

Bupa's existing deal with Spire runs out next year, which may hit the hospital group's margins, industry insiders said.

Spire does not disclose what proportion of its revenues are accounted for by Bupa, but one source suggested they were a "substantial minority".

A number of bidders looked at buying Spire, including the private equity group CVC Capital Partners, which teamed up with the Abu Dhabi Investment Authority to make an offer.

Earlier this year, regulators diluted a recommendation that would have forced Spire's larger rival, BMI Healthcare, to sell seven facilities.

The Spire float is being overseen by Bank of America Merrill Lynch, Morgan Stanley (Berlin: DWD.BE - news) , JP Morgan (Other OTC: JPYYL - news) and Numis Securities.

A spokeswoman for the company declined to comment.