Legal Business Blogs

Dealwatch: Sign of the times for advisers on Priory Group and vegan foods deals

Innovative, Covid-driven transactions have continued to emerge in recent months, with the first working week of 2021 proving no exception. As many embark on ‘Veganuary’ after the meaty excesses of the holiday season, a timely deal has been the acquisition by LIVEKINDLY Collective, a collection of plant-based food companies, of No Meat, Iceland Foods’ vegan meat alternative company.

Also topical, given the increasing challenges to mental health imposed by the pandemic, is a deal that sees Acadia Healthcare Company sell its UK business – which operates as The Priory Group – to Waterland Private Equity for £1.08bn.

Morrison & Foerster  advised LIVEKINDLY Collective as it added No Meat, which currently sells its vegan products in Iceland, Asda, and Ocado in the UK, to a group of companies that include the Fry Family Food Co, LikeMeat, Oumph! and  LIVEKINDLY.

The MoFo deal team was led by London corporate partner Andrew Boyd and included London technology transactions partner Alistair Maughan, San Francisco corporate partner Alfredo Silva, London tax partner Sophie Allen and London privacy/employment partner Annabel Gillham.

Skadden, Arps, Slate, Meagher & Flom advised the seller with a team led by corporate partner George Knighton.

Meanwhile, Kirkland & Ellis, Macfarlanes and Goodwin  all won mandates on the sale of the Priory Group, which constitutes all of Acadia’s UK business.

Kirkland is acting for Acadia Healthcare, fielding a transatlantic team led by London transactional partners Tom McCarthy and Adrian Maguire and including debt finance partners Stephen Lucas and Leon Daoud, tax partner Dulcie Daly and antitrust partners Sarah Jordan and Matthew Sinclair-Thomson. In New York, the team included transactional partners David Feirstein and Carlo Zenkner, debt finance partners Jason Kanner and Andrea Weintraub, tax partner David Mannion and capital markets partner Marsha Mogilevich.

Macfarlanes advises new client Waterland Private Equity Investments on the deal, which will see the buyer combine Priory Group with its existing portfolio company MEDIAN, Germany’s leading provider of rehabilitation, neurology and orthopaedic treatments, to create Europe’s leading rehabilitation and mental health services provider. The team for this matter was led by corporate and M&A partners Peter Baldwin and Stephen Pike and included competition partner Malcolm Walton, tax partner Peter Abbott and regulatory partner Andrew Henderson.

Meanwhile, Goodwin advised longstanding client Medical Properties Trust on its agreement to acquire a portfolio of select behavioural health facilities, and their concurrent leaseback, from The Priory Group. The deal includes a £800m secured interim loan, to be offset against the acquisition price, as well as a £250m short-term bridge loan, provided by MPT. MPT will also acquire a 9.9% indirect equity interest in The Priory Group operations. The Goodwin team included London partners David Evans, Joe Conder, James Spence, Paul Lyons, Richard Semple and Rob Young, with US law advice provided by Yoel Kranz in New York.

Goodwin’s REIT capital markets group in New York also acted for MPT in its underwritten public follow-on offering of roughly $710m, with the net proceeds to be used by MPT to fund the Priory Group transactions. The £800m financing will be replaced by a sale and leaseback arrangement, with the facilities having 25 year leases and two options to extend for another 10 years each.

Speaking to Legal Business, Joe Conder, partner in Goodwin’s London real estate industry group, said: ‘Real estate delivering specific operational activities like healthcare, logistics and student accommodation has been relatively bulletproof since Covid hit. These sectors have been resistant to, or even benefited from, the Covid situation that is all around us.

‘The wider investment market as a whole, including offices that people aren’t using and retail premises that have so obviously been hit, is stagnant. It has been put into a state of suspended animation courtesy of the government support schemes and the result is we are neither in the last property cycle nor a new one because there is no proper means of establishing pricing.

‘Ultimately distress will come through, when that support is withdrawn, and that is when it will become clearer how to reprice, and restart, that part of the market.’