Two large NHS landlords are to merge after shareholders voted to pursue a tie-up rather than selling to KKR, the American private equity group, for £1.7 billion.
Assura shareholders had until Tuesday to decide whether to take the cash offer tabled by KKR and Stonepeak Partners, its bidding partner, or merge with Primary Health Properties (PHP) instead.
• Assura-PHP merger looks in good health
Both sides needed a simple majority to claim victory. Defying expectations of a closer vote, 62.9 per cent backed the PHP merger. KKR and Stonepeak got less than 17 per cent.
Andrew Saunders, a real estate industry analyst at Peel Hunt, said it was “not only a victory for [PHP] but also one for critical UK infrastructure, the UK stock market, the delivery of healthcare in the British Isles and society at large in our view”.
Harry Hyman, PHP’s chairman and founder, thanked investors “for the strong backing they have given our offer”.
Mark Davies, PHP’s chief executive, added: “Our focus now is on delivering against the vision we have shared to modernise critical social infrastructure in primary care across the UK and Ireland.”
Altrincham-based Assura was set up in 2003 and owns more than 600 healthcare buildings worth £3.2 billion.
Primary Health Properties owns 516 surgeries, dental practices and medical centres, from Ramsgate up to the Scottish Highlands and across to Cork, Ireland. The assets were last valued at £2.8 billion.
Between them, the two groups generated rental income of £333 million last year, close to 85 per cent of which is underpinned by revenues from the UK and Irish governments.
The vote brings to an end a takeover battle that has been running since February and was debated in the House of Lords.
KKR and Stonepeak were willing to pay £1.7 billion in cash for Assura, whereas PHP had offered Assura shareholders £460 million in cash plus a 48 per cent stake in the combined business.
The Assura board initially favoured the all-cash private equity deal, but switched its recommendation under pressure from shareholders who wanted to remain invested in a healthcare landlord listed on the London stock market.
The shareholders’ argument, and that of many industry analysts, was that by taking the private equity cash they would be selling out at the “bottom of the cycle” and would miss out on the expected increase in rents and property valuations over the next few years.
A number of large Assura investors — including Schroders, Aberdeen, TR Property Investment Trust, Gravis and Baillie Gifford — publicly stated their intention to back a merger.
KKR and Stonepeak’s last-ditch attempt on Friday to garner some support for their offer drew a rebuke from the Takeover Panel and they were forced to correct some of the claims they made.
Most expect that, with their own bid having failed, the private equity duo will now sell the 5 per cent stake they had built up over the past few months to PHP rather than hanging on to a small holding in the enlarged group. A spokeswoman for KKR declined to comment.
As soon as the percentage of shares in support of PHP’s merger surpasses 75 per cent, Assura will be delisted. That threshold is expected to be breached within weeks.
Although PHP is now free to complete its acquisition of Assura, it must hold off from combining the two businesses until the Competition and Markets Authority has given its approval.