Duke Street Capital sells Paragon Healthcare Group, the leading provider of residential care homes to adults with learning disabilities in the UK,
to HgCapital for £322 million

Duke Street Capital ("DSC"), the independent private equity fund manager, has today sold Paragon Healthcare Group Limited ("Paragon" or the "Company) to HgCapital and members of the management team for a total consideration of £322 million.  The transaction represents a return of 3.5 times DSC's original investment and an IRR of c.50%.  As part of the sale, the existing management team of Paragon has realised part of its investment and re-invested alongside HgCapital.

In 2001, DSC acquired Milbury, an existing provider of residential and community care for people with learning disabilities and other complex needs. A new management team was introduced bringing with them many years of experience in healthcare and private equity sectors including John Robinson, Chairman; Nigel Harris, Chief Executive; Douglas Quinn, Managing Director; and Nigel Moreton, Finance Director.  This team, strongly supported by DSC, was able to turn around the Milbury business and execute a further four smaller acquisitions, in order to create the leading provider of high-quality services for adults with learning disabilities and complex needs in the UK.

Paragon now operates over 1,600 beds and has been the fastest growing provider in the sector during the last few years, having opened over 650 new beds since DSC's acquisition of Milbury.  Paragon's focus has been on providing the highest quality of care to its service users. The Company has also closed over 320 beds which did not meet its high standards and now has one of the youngest estates in the industry.  Paragon as the market leader is now set to continue its growth to satisfy the increasing need for high-quality residential care provision in the learning disability sector, either through continued strong organic growth or through selective acquisitions.

John Harper, Partner at DSC, commented:

"Paragon is a typical Duke Street deal.  Together with an outstanding management team and supported by our experienced operating partners we have created value by leveraging a sound platform company through a well executed buy-and-build strategy. This approach has driven outstanding performance for Duke Street's existing funds and will be continued in our next fund, DSC VI.  The exit from Paragon has delivered an excellent cash return for our investors and is further evidence of the success of our strategy."

Nigel Harris, former Chief Executive and now non-executive director of Paragon, added:
"With Duke Street's support and the excellent staff at Paragon we have created the leading provider in the UK with a total commitment to delivering the highest quality of care to adults with learning disabilities.  With its new backers, Paragon is now poised for further growth through the continuing development of innovative and high quality services, which meet the individual needs of the people entrusted to our care."

DSC and Paragon were advised on the sale by Close Brothers.

For further information please contact:

Close Brothers

Justin Clark 020 7655 3784 or Richard Grainger or Gareth Healy on 020 7655 3100