Primary proposes merger with Assura to create healthcare property giant
Primary Healthcare Properties has upped its bid for Altrincham healthcare property business Assura in an audacious merger proposal and that a merger healthcare property business would be a far better business than selling out to private equity.
PHP hopes a deal for shareholders to vary the amounts of PHP shares and cash, and a retention of the quarterly dividend of 0.84 pence per share which is due to be paid on 9 April 2025 will be enough to convince Assura’s board and shareholders to ditch a tabled “final” bid from private equity giant KKR, which Assura said last month it was minded to accept.
This deal values Assura at approximately £1.5 billion and would be a premium of 23.5% to Assura’s closing share price of 37.4p.
Assura shareholders would hold approximately 48% of the merged business and they claims the deal “would deliver significant strategic and financial benefits for both sets of shareholders.”
PHP acquired MedicX PLC in 2019 which had a net asset value of approximately £367 million and the merger made £4m of annualised cost saving synergies.
PHP also maintain that the cash offer will be fully financed through new third-party debt, implying it would be cheaper to service that debt than the KKR offer.
A statement to the market claimed: “PHP is actively engaged in discussions with potential partners to reduce leverage following completion of the transaction to return to the target loan to value ratio and is confident that the combined group would continue to benefit from an Investment Grade credit rating.”
On the 10th of March, TheBusinessDesk.com reported that the Assura board was “minded to recommend” a new offer from a consortium led by Kohlberg Kravis Roberts (KKR) which values the Altrincham-headquartered company at £1.6 billion.
The 49.4p share cash offer is a 2.9% increase on KKR’s previous proposal of 48p, and both pledged to retain dividend payments and represents a 30.6% premium to the average Assura share price of 37.8p over the 3 months to 13 February 2025.
The consortium of KKR and Stonepeak, both long-term infrastructure investors, has said it will deploy further capital to the portfolio to continue its growth.
Assura and KKR have been contacted for comment.
At 4:17pm on the 3rd of April 2025 Assura said: “The board … notes this morning’s announcement by Primary Health Properties plc and confirms that it received today a revised indicative proposal from PHP regarding a possible share and cash offer for the company.
Panmure Liberum immediately issued a note saying the lower PHP offer should be the preferred option for shareholders as Assura’s assets are socially critical infrastructure which could be monopolised in by private equity, that a deal with PHP will result in significant cost and operating synergies and the new, scaled business will benefit from a lower cost of capital.
Shore Capital analyst Andrew Saunders said the proposal offers significant value upside over KKR: “while at face value this is lower than the 49p in cash currently sitting on the table from KKR, it offers significantly more in our view once other factors are taken into consideration including the benefits of scale, cost savings and the re-rating potential offered by equity.”
Manchester investment platform AJ Bell’s investment director, Russ Mould, said: “It’s not often that a rival bid will come in at a lower level than one already on the table. Yet that’s the situation at medical facilities owner Assura where its UK peer Primary Health Properties has returned to counter the current proposal from private equity firm KKR.
“PHP’s argument is that there will be benefits from the combination for both sets of shareholders, and some investors in Assura might be persuaded by this argument given KKR’s takeover would be at a price some way below the valuation the company enjoyed a few years ago.
“However, others may prefer to take the cash now and, on that basis, Primary Health’s offer looks less attractive.”
