New shares in Primary Health tradeable following MedicX merger

New shares in Primary Health tradeable following MedicX merger – following on from the announcement on 14 March 2019 by MedicX Fund Limited and Primary Health Properties (PHP) that their merger had become unconditional in all respects, PHP announced that dealings in the new shares became effective at 8.00 a.m. today (March 15, 2019). The shares will trade on the London Stock Exchange main market.

The merger between the two real estate investment trusts was agreed in late January 2019, with existing MedicX shareholders receiving 0.77 new shares for each existing MedicX share they held. The deal sees PHP owning 69% of the new entity. These new shares rank equally in all respects with the existing ordinary shares in issue, including the right to receive and retain dividends and other distributions.

Merger creates UK’s largest healthcare property investor

The merger has created the UK’s largest healthcare property investor with a portfolio of nearly 500 properties worth £2.3bn. At around 90%, the NHS accounts for the vast majority rental income generated by the original PHP portfolio, with pharmacies picking up most of the rest.

The PHP and MedicX boards believe that there is a compelling strategic, operational and financial rationale for the merger.

• The two companies’ respective portfolios are highly complementary and the combined business will represent a stronger platform with increased scale and financial resources for further investment into its NHS-supporting estate.
• The enlarged group will be more able to meet the increasing demand for high quality primary healthcare facilities across the UK and the Republic of Ireland thereby supporting doctors, alleviating pressure on hospital departments and ultimately aiding the welfare of patients.
• Combining the two businesses is expected to create significant value for both MedicX and PHP shareholders through operational and investment management synergies, leading to a reduced EPRA Cost Ratio, as well as financing savings over the medium term.
• Nexus, which provides property management, administrative and advisory services to PHP, has agreed to provide such services to the enlarged group, with certain employees of Octopus Healthcare, MedicX’s existing investment adviser, and OAIFM, MedicX’s existing investment manager, transferring to Nexus.

The combined company will have:

• a portfolio of 479 properties in the UK and the Republic of Ireland with a combined value of approximately GBP2.3 billion;
• a strategic focus on the delivery of primary healthcare reflected in the increase in funding set out in the NHS Long Term Plan published earlier this month;
• an enhanced ability to meet the increasing needs of the primary healthcare sector in the UK and the Republic of Ireland, for the provision of a range of modern, purpose-built and integrated primary healthcare services to the local communities;
• significant cost savings, estimated at GBP4.0 million per annum from the end of the first full yea (reducing to GBP3.5 million from year six), equivalent to an annual saving of 0.4 pence per share. This is made up of:
  • immediate savings in aggregate management fees arising from the unification of management under Nexus, PHP’s existing property adviser, which are estimated to represent an annual saving of GBP3.0 million (GBP2.5 million from the sixth year following the Effective Date); and
  • operational cost savings from duplicated listing, administrative and other operational expenses and direct property costs which are estimated at GBP1.0 million per annum by the end of the first full year of operation following the Effective Date;
• an EPRA Cost Ratio expected to be the lowest in the UK-REIT sector;
• broader access to capital at a reduced cost – over the medium term it is expected that there will be opportunities for material additional cost savings through optimising financing arrangements.

PHP / MXF : New shares in Primary Health tradeable following MedicX merger