Patientline, the hospital communications provider, was taken private yesterday in a deal that rendered shareholders’ investments worthless.

The company has sold its subsidiary Patientline UK to Hospedia, a newly incorporated company that includes Patientline’s main competitor, Premier Telesolutions. Following the sale, shares in Patientline are expected to be cancelled from July 28, leaving 120 institutional investors out of pocket.

The company’s shares had sunk from their January 2002 high of 228½p to ¼p yesterday.

Hospedia will be run by Tim Weil, chief executive of Premier, with Tim Sherwood, a director of Redstone, the communications company, as chairman, subject to approval from the Office of Fair Trading. It is understood that although Patientline executives will be kept on, none will be on the board.

Patientline was previously run by Derek Lewis, former head of the Prison Service, who successfully sued Michael Howard, the Home Secretary of the day, for unfair dismissal. Mr Lewis was ousted by a shareholder revolt in 2006.

Patientline said yesterday that after working with its lenders to find a resolution to its level of debt and carrying out a review of its options, it had decided to file for administration, appointing Deloitte & Touche as its administrators.

Patientline’s debt is being cut by more than £35 million through a debt-for-equity swap in which the banks – Royal Bank of Scotland, HSBC, Bank of Scotland, and IKB Deutsche Industriebank – swap the debt for shares in Hospedia. Once the takeover is approved, Milestone Capital, which owns the majority of shares in Premier, will also become a shareholder in Hospedia, along with the management team led by Tim Weil.

Hospedia will also receive more than £12 million of additional investment from Patientline’s banks.

The sale to Hospedia means that the company will continue to operate bedside console services in hospitals across Britain. Its handsets and monitors, fitted to 80,000 beds when Premier is included, can be used for telephone, TV, games, internet and radio. Patients or their families pay a fee to use them. Hospedia hopes to install a further 20,000 monitors.

Nick Winks, chief executive of Patientline, who took over last November when the business was running £87 million of debt, said: “After . . . exploring many potential options, I am convinced that this transaction is in the best interests of our customers, staff and banks.”

Shares in the company plummeted in 2006 after it was the subject of an Ofcom investigation into overcharging for its services. It was exonerated, but the telecoms regulator recommended a review of its pricing structure and stopped it installing new terminals during the investigation. It has since suffered from management squabbles and posted losses each year.

— Southern Cross, the stricken care homes operator, has secured a lifeline from its bankers and has managed to extend its loan facilities on a £46 million debt until October to allow the sale of property assets to reduce debts. The announcement last month that the company was in breach of its banking covenants, after the property market downturn, left it unable to sell some property assets and sent the price of its shares into freefall.

Bedside manor

1993 Patientline founded
Nov 1996 Raises £6.3 million from Mercury Private Equity
Apr 1998 Derek Lewis, right, former head of the Prison Service, joins as chairman
Jan 1999 Mr Lewis becomes chief executive as well as chairman
Dec 1999 Patientline system given Millennium Product status by Tony Blair, then Prime Minister, and its products are displayed in the Millennium Dome
Mar 2001 Lists on AIM and is valued at about £100 million
May 2001 Jim Glover appointed chief executive. Mr Lewis stays on as chairman
Apr 2004 Company criticised when it emerges that its television monitors cannot be switched off by patients and are being left on for up to 15 hours
Jul 2005 An Ofcom investigation begins into the cost of calls to and from Patientline phones after it emerges that callers are paying up to 49p a minute to speak to patients
Jan 2006 Ofcom investigation does not demand action from the company but registers concerns about the level of charges for incoming calls
Apr 2006 Mr Lewis forced to step down after shareholders, led by Shore Capital, rebel
Jun 14, 2006 Shares plunge more than a third after full-year losses at the company more than double to £24.7 million. The terminals cost about £1,400 a bed to install and Patientline is footing the bill for the work in return for an NHS contract
Nov 2007 Nick Winks becomes chief executive

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