Just what the doctor ordered: a health check for the UK stock market starring a contested bid for Assura, the property outfit whose 603 buildings house GP surgeries and private hospitals.<\/p>\n
No one really needs Rachel Reeves\u2019s spending review to spot the favourable climate for this sort of business. The chancellor is promising \u00a329 billion a year of extra NHS funding, including plans for \u201cthe training of thousands more GPs\u201d. On top, there\u2019ll be a shift of healthcare onto their doorstep: from \u201chospital to community\u201d. And, even with that extra public money, there\u2019ll still be heaps of demand for private hospitals: a waiting list of 7.4 million people will see to that. <\/p>\n
In short, just the sort of backdrop for Assura to thrive \u2014 not least when real estate investment trusts (Reits) are getting a fillip, anyway, from lower interest rates. So, maybe it\u2019s no big shock to find the company at the centre of a \u00a31.7 billion bid battle between two different sorts of suitors: the private equity duo of KKR and Stonepeak offering a cash exit from the London exchange; and its listed rival Primary Health Properties dangling a cash-and-shares bid to create a bigger healthcare Reit, 48 per cent owned by Assura shareholders. <\/p>\n
No, the surprise, at least on the face of it, is that the Assura board, chaired by Ed Smith, reckons it has no better option than to recommend the private equity bid. Worse, a low-ball one at that. <\/p>\n
The pair\u2019s \u201cbest and final\u201d offer at 52.1p a share, including two already announced 0.84p quarterly dividends, is at a pitiful 3.4 per cent premium to Assura\u2019s 50.4p a share net asset value. Or, to put it another way, the best the board thinks it can get for a business that\u2019s spent 22 years building its portfolio is a teensy bit more than it paid for the properties. <\/p>\n
In a sense, it gets worse, too. The board has an alternative option in PHP\u2019s offer, coming largely in shares \u2014 0.3769 new ones for each of Assura\u2019s plus 12.5p cash and both dividends. And, after a 3 per cent rise in PHP shares to 103.2p, probably due to merger arbs, its bid is now marginally higher: almost 53.1p per share. So, why not take that, share in \u00a39 million of mooted synergies, and be part of a bigger Reit capitalising on an ageing population, the extra NHS spending from Reeves\u2019s review and a rising, index-linked rent roll for GP practices that\u2019s underwritten by the taxpayer? <\/p>\n