NHS Landlord Assura backs £1.8bn merger offer from Britain’s PHP

Assura has accepted a takeover offer from rival London-listed real estate investment trust Primary Health Properties (PHP) after a three-month bidding war. 

The healthcare buildings business backed the deal after PHP warned that a lower, rival bid from a private equity consortium posed ‘material risks and downsides’ for its shareholders. 

Both firms invest in properties leased out to healthcare organisations, including the National Health Service.

Under the new proposal, Assura investors will receive 0.3865 new PHP Shares and 12.5p in cash for every share they hold, along with a special dividend of 0.84p per share.

The deal values the NHS landlord at around £1.8billion, a 47.1 per cent premium to its closing share price of 37.3p on 13 February, the final day prior to the offer period starting.

For the last three months, PHP, a real estate investment trust, has been engaged in a bidding war with a consortium comprising Kohlberg Kravis Roberts (KKR) and investment group Stonepeak Partners.

Assura told investors in March that it was minded to accept a £1.6billion offer from the consortium after rejecting PHP’s initial bid.

Although the Altrincham-based firm approved the deal the following month, many of its investors opposed the consortium’s takeover because they believed the price was too low.

Opponents have included top-ten shareholders Quilter Cheviot and Schroders, as well as Allianz, Gravis, Baillie Gifford and Columbia Threadneedle.

Assura did recommend a ‘best and last’ £1.7billion offer from KKR earlier this month, but has now decided to withdraw this advice and asked its investors to back PHP’s proposal instead.

It marks KKR’s second defeat of the day after Advent International agreed a £3.8billion deal for Spectris earlier on Monday. 

Harry Hyman, non-executive chair of PHP, said the merger ‘will create a leading healthcare-focused listed REIT with the scale and expertise to deliver significant benefits for the shareholders in PHP and Assura.’

Were KKR to acquire Assura, it would represent another major loss for the London markets, which have seen multiple companies sold to foreign buyers in recent years.

Among the firms to fall into overseas ownership during 2024 were Robinsons squash producer Britvic, music rights investor Hipgnosis Songs Fund, and cybersecurity giant Darktrace.

Just this year, the takeovers of investment platform Hargreaves Lansdown and Royal Mail’s parent company, International Distribution Services, have been completed.

Other groups to agree acquisition deals include Deliveroo, scientific instruments maker Spectris, software developer FD Technologies, and semiconductor firm Alphawave.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said PHP is likely to ‘benefit from several tailwinds which help underpin its long-term dividend-paying potential’.

The UK Government wants to utilise the private healthcare sector to help reduce the massive NHS backlog; 7.4 million people in England are currently waiting for routine hospital treatments.

Streeter also noted that Assura’s tenants ‘can be considered to be lower risk’ as the company has a target to derive between 80 and 90 per cent of its income from the Government.

Assura shares have risen by around a quarter to 50.1p over the past 12 months, but have slumped by more than a third in the last five years.

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