City slicker

‘The danger with a PLC-type takeover is that you don’t know when a counter offer is going to come in.’

No, I haven’t stumbled into Gordon Gekko’s Manhattan boardroom on the set of Wall Street 2. Rather, I am sitting in the unremarkable Beaconsfield office of Pushpa Raguvaran, listening to the chief executive of social landlord Housing 21 describe the pitfalls of corporate deal making.

As her thrusting assertion reveals, Ms Raguvaran is no ordinary housing boss. In fact she is the only housing association chief executive in the country, and probably on the planet, to have bought a publicly listed company. This time last year the former City advisor was mid-way through a high octane two-month negotiation to acquire AIM-listed Claimar Care Group.

‘They run it like a trade sale process,’ she says with naked enthusiasm, explaining the rules which ban loose talk during such deals.

‘We had a list of people who knew about it and we had to keep to all of that, very strictly. We were told by our advisors and lawyers “you could be prosecuted for insider trading”… You know, “it’s all very exciting, but don’t talk about it”.’

Twelve months on and Ms Raguvaran is more than happy to talk in detail about the acquisition, which ended with the association seeing off bids from the likes of Mears and Allied Health Care to clinch the £19.5 million deal in September last year. The Claimar purchase has enabled Housing 21, which specialises in older people’s housing and care, to more than double the volume of domiciliary care services it provides to 120,000 hours a week and boast a 3 per cent share of the fragmented £3.6 billion UK market it hopes to expand into further.

Significantly, the move marks a paradigm shift in the nature of landlords catering for vulnerable households. Ms Raguvaran holds that, when it comes to housing older people at least, diversifying the services she offers is essential if she is to meet the needs of her 17,500 households and the ageing population at large. And as the Housing 21 example shows, that evolution is thrusting social landlords deeper into the corporate world in order to compete for a share of lucrative markets. Exciting it may be, but is it the right call? Absolutely, reckons Ms Raguvaran. ‘The journey over the last 10 years has been moving from housing, [to care] right through into healthcare and recognising that care is integral to the way we provide housing for older people,’ she says. ‘Our strategic vision is to continue to develop different kinds of services for older people.’ And that, she adds, means growth.

Eventful decade

Back in spring 2009, Ms Raguvaran was Housing 21’s finance and commercial director, effectively second in command to the widely respected chief executive Melinda Phillips. During the previous 12 months, the pair had seen their care business grow by 40 per cent. ‘Organic growth is quite hard,’ explains Ms Raguvaran. ‘You have to work at tenders, you have to go about recruiting staff, training them… It was going to be really difficult to get us to the kind of levels that were going to reduce our costs.’

Underlining the need to increase volumes was the troubling financial outlook. ‘We saw that over a period of time, public spending would have to be cut to meet the [national] deficit requirements,’ she adds. Acquisition had been on the cards for a while by the time the chance to buy Claimar Care, and the 70,000 weekly hours of care provision that came with it, arose. Claimar offered five subsidiaries, ranging from a franchise homecare business to PharmAssured, a pharmacy operation.

One of the reasons Housing 21 became the country’s first not-for-profit organisation to buy a listed company is that few people involved in selling them realise not-for-profits are potential purchasers. It was no lucky break that Housing 21 found itself in the running on the Claimar deal. Ms Raguvaran, described by Housing 21 chair David Grayling as ‘very, very hard working’, invested considerable energy in broadcasting her strategy for growth.

‘If you look at some of the tables and statistics and things they put out in the [care and healthcare] sector, you don’t see housing associations even though actually we provide a lot of those services. We’re not being regarded as players. Anchor certainly appears on the residential care tables, but organisations like Housing 21, Leonard Cheshire, Sanctuary which provide care services as part of their subsidiary services - you don’t see them,’ she says.

It was left to the former investment bank consultant (see box, bottom right) to set the record straight. ‘I said “you’re not really describing the market here”,’ she recalls of her early conversations with the analysts and advisors she hoped would lead her to a deal. ‘The private sector hasn’t really seen our sector as true competitors. We’re just nice people who do some care and are not really competitively structured and if we do win things it’s because we can afford to make losses.’ By the time Claimar Care came up for sale last year, Ms Raguvaran had done enough to reverse that perception, at least of Housing 21. ‘The advisors picked up the phone and …[said] are you interested? That in itself was quite telling,’ she says. ‘I got very excited.’

A done deal

That call came in spring 2009. By September it was a done deal, the care group’s shareholders accepting Housing 21’s offer to pay £19.5 million for the business, valuing it 212 per cent higher than the £32 million turnover business’s closing price a month earlier.

Knowing how that might play in the press - naïve do-gooders pay over the odds - another display of commercial savvy saw Ms Raguvaran hire a City PR firm, ‘to handle our concerns about how us bidding at a premium that was significantly above what would normally be a premium for shares over the trading price would look’. The negative headlines didn’t come - justifiably, adds Ms Raguvaran, who argues the price tag reflected the business’s latent value and the then state of the market.

‘I thought their insight was really helpful,’ she adds. ‘They ask the sorts of questions (who are you, who owns you, what are you in the business of doing?) that certainly helped me see things from the perspective of sectors that don’t know us. As social landlords we can be insular and can make assumptions about how people should really see us. As we begin to operate in different markets - because we are, we are operating in different markets - I think we may have to do some work in raising awareness of what we’re about as an organisation.’

Could such an exercise also mollify the critics of the six-figure salaries many housing association bosses, including Ms Raguvaran whose compensation totals around £167,000 a year, receive? In the past, particular venom has been reserved for organisations which, like Housing 21, provide older people’s housing after this magazine revealed details of the £391,000 pay packet of John Belcher, former boss of Anchor (Inside Housing, 18 September 2009). The landlords’ argument, much as Ms Raguvaran contends, has been that the increased diversification of their services into privately dominated care and health markets demands competitive salaries.

Testing times

Housing 21’s Claimar acquisition has proved the first real test of this argument. Would the landlord struggle to retain employees loathe to sacrifice their private sector perks? ‘Pleasantly, what we’ve found is that at the carer end and middle and senior management level there isn’t an awful lot of difference [in compensation],’ says the boss, adding that no former Claimar employee has left her organisation over pay. ‘The biggest difference is at very senior, director levels. It’s mainly incentivisation - bonus packages and [share schemes]’.

Though this experience suggests the ‘competitive pay’ argument is less than sound, Ms Raguvaran maintains it has merit. ‘Maybe we were lucky,’ she suggests. ‘I think it is quite difficult for organisations like Housing 21, Anchor and others who have diversified into other markets because they are looking to operate in markets where people are incentivised differently,’ considers Ms Raguvaran, who joined Housing 21 14 years ago.
‘Where I sit is that we do do an awful lot of complex stuff. In the end individual organisations have to come to decisions about [renumeration] themselves. Personally, I feel privileged to work for an organisation like this. The opportunity to make a real difference to people’s lives is in itself quite attractive,’ adds the mother of two.

One thing is certain: there is plenty of complexity about running Housing 21. ‘It’s hard to underestimate the complexity of what they’ve taken on [with the Claimar acquisition],’ says Bruce Moore, boss of Hanover, another older people’s landlord. Housing 21 has already put Complete Group, a complex care provider which came as part of the Claimar buy, back on the market in order, says the boss, to concentrate on its core older
people market.

And it’s pharmacy business has lost around £20,000 since Housing 21 took it on, though the landlord still hopes to make a go of it with plans to double its £400,000 turnover in the coming year. Indeed the scale of the challenge is one of the reasons Ms Raguvaran got the top job, despite having a relatively low profile in the sector after years as ‘the finance person’.

‘It was the right appointment - we wanted to make sure there was no loss of momentum,’ says chair Mr Grayson. ‘Melinda [Phillips] is a tough act to follow, but when she announced her retirement I said that Melinda’s greatest legacy was the strength of her senior management team. Pushpa is a worthy successor.’

No doubt she intends to prove it - and all from an unassuming office in a Buckinghamshire market town.

Have your say

You must sign in to make a comment