The private equity industry's interest in European healthcare was underlined yesterday when Allianz Capital won the auction for Four Seasons, the UK nursing home operator, with a £775m ($1.4bn) bid.

Allianz, which faced competition from private equity rivals Blackstone and Electra in the final round, acquired Four Seasons from Alchemy.

Four Seasons was Alchemy's largest single investment. The private equity group run by industry veteran Jon Moulton spent £75m building the group after adding Omega and Principal Healthcare to the initial 1999 Four Seasons deal.

Alchemy will reap more than £300m from yesterday's deal, more than four times its original investment.

Mr Moulton said the sector was attractive because it had good asset backing, long-term low-growth characteristics and stable cash flows. "We have been able to buy underperforming assets and make them perform better," he said.

BC Partners, the UK buy-out group, is also interested in making further acquisitions in the sector and is thought to be considering a hospital deal in Spain.

Healthcare has proved attractive to private equity groups because governments or their agencies often end up paying the bills. The industry is also being rationalised in order to make it more efficient which has also created opportunities for private equity groups.

Last month, BCP strengthened its position as owner of one of Europe's largest private hospitals groups when it bought Barcelona-based Teknon for €90m ($111m).