Primary Health Properties (PHP) has made a counter bid for Assura that values the company at £1.68bn.
The shares and cash offer would see Assura shareholders receive 0.3769 new PHP shares and 12.5 pence in cash.
This includes the already paid quarterly dividend of 0.84p (paid on 9 April 2025) and the quarterly dividend of 0.84p expected to be paid on 9 July 2025.
Based on the PHP closing share price of 99.5p on 15 May 2025, the offer implies a total value of 51.7p for each Assura share (including the Assura dividends of 1.68p) and values Assura at around £1.68bn.
It is an almost 12% uplift on its previous offer and is a 4.7% premium to the current recommended cash offer of 49.4p made by Kohlberg Kravis Roberts & Co (KKR) and Stonepeak Partners.
Potential benefits of combination
The PHP board said that it believes that a combination of Assura and PHP would deliver significant strategic and financial benefits for both sets of shareholders, including:
- Creating a UK REIT of significant scale, becoming the ninth largest UK listed REIT by market capitalisation, benefiting from increased public markets presence, greater index weighting and improved investor flows;
- Creating a specialist of greater scale in a growth sector, underpinned by social infrastructure assets, supported by government policy placing greater focus on primary care and increasing the demand for modern healthcare facilities;
- A combined £6bn portfolio of long-leased, sustainable infrastructure assets principally let to government tenants and leading UK healthcare providers, benefiting from increased income security, longevity, diversity of product type, geography and mix of rent review types;
- Ability to benefit from the improving rental growth outlook reflecting the significant increases in construction costs in recent years together with the historically suppressed levels of open market rental value growth in the sector;
- Combined ability to realise embedded rental increases and back rent arising from the significant number of outstanding rent reviews across both portfolios;
- Estimated run-rate cost synergies of approximately £9m on an annualised, pre-tax basis, expected to be fully achieved by the end of the first full financial year post completion, supporting expected earnings accretion and dividend growth for both companies, with the Combined Group expected to have one of the lowest EPRA cost ratios in the sector;
- Improved access to capital markets, both debt and equity, with potential cost of capital benefits due to enhanced scale, liquidity and diversity with the enlarged business expected to retain a strong investment grade credit rating;
- Embedded value of the low fixed cost, long-term, debt facilities of both Assura and PHP valued at 5.5 pence per share as at 30 September 2024 and 9.4 pence per share as at 31 December 2024 respectively, which is expected to be largely retained following completion of the Combination to the benefit of the Combined Group’s shareholders; and
- Increased ability to deliver asset management initiatives and development projects to help meet the demand for more fit for purpose space which will be required as part of the NHS’s future plans including the continuation of the shift of services out of hospitals and into the community.
The PHP board added: “PHP’s market rating is cyclically low and a return to its long-term average market rating may occur more quickly through the creation of a stronger Combined Group with expected enhanced growth driven by two highly complementary property portfolios and a lower cost of capital.
“A return to a normalised, long-term, trading valuation provides the potential for Assura Shareholders to participate in significant share price valuation upside compared to crystalising value in cash in the short term, while also benefiting from PHP’s strong long-term rating, continuing capital growth and a growing dividend.”
Harry Hyman, chair of PHP, said:
“The PHP Board believes the strategic rationale and financial terms of the proposed combination of the UK’s two largest healthcare focused listed REITs are compelling, with the potential to create significant long-term value for both PHP Shareholders and Assura Shareholders, and in excess of the cash offer price from the Consortium.
“We believe we have reached an inflexion point in the current economic cycle with strong rental growth and lower interest rates enhancing primary care property values and net asset value per share expected to improve. Additionally, there has been significant consolidation in the UK real estate sector over the last few years with investors increasingly focused on larger, more scalable REITs with more efficient cost and capital structures, something the Combined Group is expected to benefit from.
“Given the importance of these social healthcare assets to the public good and the government’s commitment to primary care reform, we also believe PLC ownership provides appropriate stewardship of these assets. The Combined Group can take a long-term outlook, with both PHP Shareholders and Assura Shareholders benefiting from enhanced continued and growing income and capital appreciation.”
