Primary Health Properties (PHP) has responded to the announcement made by Assura Group this morning that Assura’s board is minded to recommend to its shareholders an indicative offer from KKR and Stonepeak, while rejecting proposals for a merger with PHP as the latter is less attractive for its shareholders. In its statement, PHP says that it did make a preliminary approach on 3 March 2025 in relation to a possible all-share offer for Assura as it has long believed in the merits of a potential combination of the two businesses.
PHP says that discussions between the two parties’ financial advisers were held around the illustrative benefits of a combination and although a specific exchange ratio was not included in the proposals, this was rejected by Assura’s board on 9 March 2025.
PHP’s board says that it still believes there is considerable merit in working with the board of Assura to determine if an offer can be made on terms attractive to both sets of shareholders and is therefore considering its position. It has set out its reasons why it believes an all-share combination of the two companies would deliver significant value for both sets of shareholders as follows:
- Creating a portfolio of significantly enhanced scale;
- Reducing the cost of capital;
- Realising significant value from synergies;
- Creating a market leading platform for secure income in a growth sector;
- Strengthening the combined group’s balance sheet;
- Creating an opportunity for a premium re-rating of the combined group;
- Materially increasing liquidity in the combined group; and
- Leveraging the strong experience and expertise of the combined management team.
PHP says that there can be no certainty that an offer will ultimately be made but it will need to make an announcement of a firm offer or indicate that it does not intend to make a firm offer by 5pm on 7 April 2025. PHP says that a further announcement will be made if and when appropriate.
[QD comment MR: We think that a combination of Primary Health Properties and Assura could make a lot of sense. However, cash is king and, with KKR/Stonepeak the preferred bidder on the grounds that its offer looks superior, it is difficult to see how PHP’s offer will proceed unless it can improve its terms to make the deal more attractive. While PHP is yet to set a price, the reality is that this will likely be based largely on the NAVs of both funds and neither side is going to want to see its shareholders diluted. PHP may have a little bit of flex to improve its offer but we imagine its scope will be limited, and this is unlikely to kick off a major bidding war of the kind that Assura’s shareholders would surely like to see.
However, this issue once again highlights that private market investors are able to take a longer-term view and are putting higher valuations on these sorts of assets than listed markets are. While this inefficiency persists, private equity and trade buyers will likely continue to snap these assets up at heavily discounted prices.]
