Opposing American private equity acquisition, leading backers of British general practitioner clinics express their opposition
Assura's top shareholders ain't lovin' the idea of hookin' up with a US private equity behemoth like KKR, man. They'd rather hitch their wagon to London-listed rival, Primary Health Properties (PHP), and here's why.
Quilter Cheviot, Schroders, Allianz, Gravis, Baillie Gifford, and Columbia Threadneedle, who jointly own around 11% of Assura's shares, reckon PHP offers a more secure, long-term income source. PHP focuses on leasing properties primarily to government tenants, which provides steady income, longevity, and diversification.
PHP's track record in integrating and outperforming Assura on property returns since 2017 is no joke. On the other hand, Assura's board is skeptical of a deal with KKR and Stonepeak Partners, fearing increased execution risk and operational disruption due to the necessity to offload assets, refinance, and implement synergies.
PHP's proposal appeals to shareholders because it decreased the shareholder acceptance threshold and agreed not to reduce its offer if Assura pays an early 2025 dividend, boosting immediate returns. PHP's bid values Assura at about £1.72 billion, in line with KKR's offer. PHP's offer also includes embedded rental increases, back rent from outstanding rent reviews across both portfolios, and expected retention of equity stakes and additional management fees from private hospital assets if sold into a joint venture.
PHP clapped back at Assura's concerns over potential risks associated with their bid, stating a clear plan to reduce leverage and maintain a strong credit rating. They challenge Assura's financial downsides assertions and highlight their stable income profile derived from government-backed leases.
In short, shareholders think PHP's offer provides a more consistent, government-backed income stream, lower integration and execution risks, and shareholder-friendly financial terms, making it a better choice than the US private equity consortium led by KKR, which Assura's board views as riskier given the asset restructuring and refinancing complexities.
Investing in PHP, compared to a partnership with KKR, promises shareholders a more secure long-term income source, predominantly derived from leasing properties to government tenants. The proposal from PHP offers shareholder-friendly financial terms, including decreased acceptance thresholds and provisions for immediate returns. Moreover, PHP's focus on reducing leverage and maintaining a strong credit rating, along with their stable income profile, suggests lower integration and execution risks.
