Statement re Possible Combination
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
FOR IMMEDIATE RELEASE
19 May 2025
Possible Combination of Primary Health Properties PLC and Assura plc
Sana Bidco Limited ("Bidco"), a newly formed company indirectly wholly owned by (i) funds advised by Kohlberg Kravis Roberts & Co. L.P. and its affiliates ("KKR") and (ii) funds advised by Stonepeak Partners LP and its affiliates ("Stonepeak") notes the announcement on 16 May 2025 by Primary Health Properties PLC ("PHP") regarding the share and cash offer by PHP for Assura plc ("Assura") (the "PHP Offer").
Bidco believes that its recommended cash offer as set out in the announcement by Assura and Bidco on 9 April 2025 (the "Bidco Cash Offer") represents a superior proposal for Assura shareholders and the only proposal which provides the opportunity to realise their investment in full and in cash, as well as a path to unlock significant future growth of the business with the deployment by Bidco of further capital across the UK healthcare infrastructure space.
Bidco will continue its engagement with the Assura Board to deliver the terms of the transaction that has been recommended by Assura to shareholders, following the publication of the Scheme Document on 14 May 2025.
In relation to the PHP Offer, Bidco notes numerous critical issues which it believes significantly increase the financial risk profile of the combined entity, potentially harm the future returns and growth prospects for both Assura and PHP shareholders and lead to the combined business being highly capital constrained. Bidco notes that the PHP Offer will require significant asset disposals to manage high debt levels, which will constrain the ability of the combined business to grow and make the sustained investments in the estate to support NHS infrastructure that would be possible under Bidco's ownership. These critical issues include:
· The PHP Offer significantly increases the combined entity's leverage to 55% LTV, a level considerably higher than Assura's target leverage of less than 45%, PHP's target range of 40-50% and higher than the UK listed REIT sector of an average of c.30%(1);
· In order to reduce the combined entity's LTV back to its target range of 40-50%, the PHP Offer indicates that they will dispose of the hospital portfolio plus other unidentified disposals. We note that Assura acquired these hospitals in a competitive auction process and that as a forced seller there is a high likelihood that the combined group will achieve a materially worse outcome when it sells these assets, resulting in value destruction for shareholders. Comparable challenges can be expected for the other unidentified disposals including even formulating coherent disposal perimeters. The size and scale of the disposals is likely to have significant time and cost implications, with liquidity for sales of this scale also questionable, as is the ability for PHP to retain an economic interest in the assets disposed of. Very limited new capital can be used for growth of the combined group whilst these disposal processes are pursued;
· Bidco believes that deleveraging through these necessary asset disposals will likely erase the Assura shareholders' EPS accretion from the combination indicated by PHP and instead result in potentially material EPS dilution;
· The PHP Offer seeks to combine the two largest providers in the UK healthcare real estate sector. This may attract scrutiny from the Competition and Markets Authority ("CMA") which Bidco believes could give rise to a degree of timing and/or execution risk, particularly in light of the CMA's power to issue an order preventing a transaction from closing (if there are circumstances which could mean that completion would necessarily result in pre-emptive action), and the prohibition in the Enterprise Act 2002 that (if a Phase 2 investigation by the CMA is triggered) prevents one merging party from acquiring shares in the other without the CMA's consent. If this were to happen, Bidco believes that the share price and valuation of Assura would be materially negatively affected (as this would likely be a scenario where Bidco's Cash Offer would have lapsed and Assura would remain listed for the time being). By choosing not to make the PHP Offer conditional on CMA approval, the PHP board is asking the Assura shareholders to bear this risk;
· Bidco also notes that the CMA has powers under the Enterprise Act 2002 to require PHP to maintain the Assura group as a standalone and independent business (even if the PHP Offer is completed), in which case PHP may not immediately be able to realise some or all of its proposed benefits from a combination of Assura and PHP. Again, by choosing not to make the PHP Offer conditional on CMA approval, the PHP board is asking shareholders to bear this risk;
· The PHP Offer indicates that PHP has secured an unsecured loan with total commitments of £1,225,000,000 for the purpose of funding the cash consideration, repaying existing PHP debt maturing in the short term, repaying Assura debt subject to a change of control and providing additional headroom to the combined group. While the PHP Offer does not provide details on the cost of this new unsecured loan, Bidco notes that the weighted average cost of debt for the Assura debt which may be subject to change of control is ~2.70%(2) and expects that the PHP loan cost of debt is significantly higher. Hence, Bidco believes that this necessary refinancing will result in substantially higher interest costs, offsetting the cost saving synergies achieved from the combination;
· PHP asserts that Assura will maintain its investment grade rating and the combined group will secure its own debut investment grade rating post completion. Were the combined group to be rated sub-investment grade, the £900 million of Assura's existing public bonds which benefit from a weighted average cost of debt of c.2.0%(3) would need to be repaid;
· Post-completion, maintaining an investment grade rating relies heavily on the success of their deleveraging programme. If the intended disposals and/or the refinancing of PHP's upcoming debt maturities (including terming-out the 30-month bridge financing) prove challenging and deleveraging slower than anticipated then this would result in a substantially higher cost of debt. Given the combined group would have a substantial, multi-billion, predominantly Sterling-denominated debt stack, the need to access long-dated bond markets would lock-in a higher cost of debt for the long-term;
· The PHP Offer draws on all of PHP's currently available debt facilities, further constraining its ability to invest for growth. Given the elevated LTV, Bidco believes that the combined entity will be constrained in raising capital to invest further in UK primary healthcare real estate, constricting the future growth prospects of the business for the foreseeable future. Both businesses have not issued primary equity for the past 3 ½ years;
· Bidco believes that additionally, the elevated LTV and lack of capital will result in not only the inability to fund growth in the asset portfolio, but also the lack of necessary capital expenditure to modernise the older GP surgery stock which will undermine the portfolio quality of the combined entity over time; and
· Although the PHP Offer currently represents a stated price of 51.7 pence per share inclusive of the April and July dividend, Bidco notes this is largely due to the share component of the offer which has risen in value since Assura's announcement of a Recommended Offer from Bidco on 9 April 2025. As is typical in combinations of publicly listed companies, in the event of a combination with Assura, Bidco believes PHP's share price is likely to revert to historically prevailing levels which would result in value dilution to Assura shareholders. At the time of Bidco's possible offer announcement on 13 February 2025, Assura's share price traded at a 24.2% discount to NAV and PHP's share price traded at 12.6% discount to NAV, whilst the UK Real Estate Investment Trust sector traded at 30.5% discount to NAV(4).
Accordingly, Bidco believes that the PHP Offer does not represent a superior proposal to the Bidco Cash Offer, and the Bidco Cash Offer would deliver significant strategic benefits to both Assura shareholders and the business going forward:
· The Bidco Cash Offer allows Assura shareholders the opportunity to realise their investment in full and in cash, at a time of high market volatility and provides maximum value and liquidity;
· Bidco's offer has materially less execution risk, instead of the high uncertainty and time required to deleverage, sell assets and to realise the proposed synergies under the PHP Offer;
· Away from the constraints of public ownership, Bidco will provide Assura with new and flexible long-term capital with which to accelerate the delivery of new healthcare properties across a portfolio of assets for GPs, the NHS, private hospitals, pharmacies and other healthcare assets, unlocking a path to significant future growth without the need for asset sales to fund growth or repay debt; and
· Bidco will act as a highly value adding partner to Assura and its management team over its next phase of growth, bringing KKR and Stonepeak's experience and operational capabilities across infrastructure and adjacent areas, their access to capital and commitment to a highly collaborative, long-term approach to their investments.
A further announcement will be made as appropriate.
Capitalised terms used but not defined in this announcement have the meaning given to them in the announcement in relation to the Bidco Cash Offer published on 9 April 2025.
Enquiries:
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Jefferies International Limited (Financial Adviser to Bidco) |
+44 (0) 20 7029 8000 |
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Philip Noblet |
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Dai Clement |
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Thomas Forrow |
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Tom Yeadon |
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Thomas Bective |
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Andrew Morris |
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FGS Global (PR Adviser to Bidco) |
+44 (0) 20 7251 3801 |
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Faeth Birch |
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Alastair Elwen |
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Oli Sherwood |
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Important Notices
Jefferies International Limited ("Jefferies"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for KKR, Stonepeak and Bidco and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters in this announcement and will not be responsible to anyone other than KKR, Stonepeak or Bidco for providing the protections afforded to clients of Jefferies nor for providing advice in relation to any matter referred to in this announcement. Neither Jefferies nor any of its affiliates (nor their respective directors, officers, employees or agents) owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Jefferies in connection with this announcement, any statement contained herein or otherwise.
Further Information
This Announcement is for information purposes only and does not constitute an offer or inducement to sell or an invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities or a solicitation of an offer to buy any securities, pursuant to the Acquisition or otherwise. The Acquisition shall be made solely by means of the Scheme Document (or, if the Acquisition is implemented by way of a Takeover Offer, the Offer Document) which shall contain the full terms and Conditions of the Acquisition, including details of how to vote in respect of the Acquisition.
This Announcement has been prepared for the purpose of complying with English law, the Listing Rules, the JSE Listings Requirements and the Takeover Code and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside of England.
This Announcement does not constitute a prospectus, prospectus equivalent document or an exempted document for purposes of English law, the Listing Rules, the JSE Listings Requirements or any other law in any other jurisdiction.
Overseas Shareholders
The release, publication or distribution of this Announcement in or into certain jurisdictions other than the United Kingdom, the United States or South Africa may be restricted by law. Persons who are not resident in the United Kingdom, the United States or South Africa or who are subject to other jurisdictions should inform themselves of, and observe, any applicable requirements. Any failure to comply with any such requirements may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such requirements by any person.
Unless otherwise determined by Bidco or required by the Takeover Code, and permitted by applicable law and regulation, the Acquisition shall not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the Acquisition by any such means from or within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this Announcement and all documents relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this Announcement and all documents relating to the Acquisition (including custodians, nominees and trustees) must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would violate the laws in that jurisdiction.
The availability of the Acquisition to Assura Shareholders who are not resident in the United Kingdom or South Africa (and, in particular, their ability to vote their Assura Shares with respect to the Scheme at the Court Meeting, or to appoint another person as proxy to vote at the Court Meeting on their behalf) may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom or South Africa should inform themselves of, and observe, any applicable requirements, as any failure to comply with such requirements may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person.
The Acquisition shall be subject to the applicable requirements of the Takeover Code, the Panel, the London Stock Exchange, the Financial Conduct Authority, the Listing Rules, the Johannesburg Stock Exchange, Finsurv, the JSE Listings Requirements and the Registrar of Companies. Further details in relation to Overseas Shareholders will be contained in the Scheme Document.
The information contained in this Announcement constitutes factual information as contemplated in section 1(3)(a) of the FAIS Act and should not be construed as express or implied advice (as that term is used in the FAIS Act and/or the South African Financial Markets Act, No 19 of 2012, as amended) that any particular transaction in respect of the Acquisition is appropriate to the particular investment objectives, financial situations or needs of a shareholder, and nothing in this Announcement should be construed as constituting the canvassing for, or marketing or advertising of, financial services in South Africa. Bidco is not a financial services provider licensed as such under the FAIS Act.
Nothing in this Announcement should be viewed, or construed, as "advice", as that term is used in the South African Financial Markets Act, No 19 of 2012, as amended.
Additional information for US Investors
The Acquisition is being made to acquire the securities of an English company by means of a scheme of arrangement provided for under English law. A transaction effected by means of a scheme of arrangement is not subject to the tender offer or proxy solicitation rules under the US Exchange Act. Accordingly, the Acquisition will be subject to disclosure requirements and practices applicable in the United Kingdom to schemes of arrangement, which are different from the disclosure requirements of the US tender offer and proxy solicitation rules.
The financial information included in this Announcement and the Scheme Document (or, if the Acquisition is implemented by way of a Takeover Offer, the Offer Document) has been or will have been prepared in accordance with IFRS and thus may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US.
Neither the US Securities and Exchange Commission, nor any US state securities commission or any securities commission of other jurisdictions, has approved or disapproved the Acquisition, passed judgement upon the fairness or the merits of the Acquisition or passed judgement upon the adequacy or accuracy of this Announcement. Any representation to the contrary may be a criminal offence in the United States.
If Bidco were to elect to implement the Acquisition by means of a Takeover Offer and determines to extend the Takeover Offer into the United States, such Takeover Offer would be made in compliance with applicable US laws and regulations, including to the extent applicable Section 14(e) of the US Exchange Act and Regulation 14E thereunder, and in accordance with the Takeover Code. Such a takeover would be made in the United States by Bidco and no one else. Accordingly, the Acquisition would be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that are different from those applicable under US domestic tender offer procedures and law.
The receipt of cash pursuant to the Acquisition by a US Assura Shareholder as consideration for the transfer of its Assura Shares pursuant to the Scheme will likely be a taxable transaction for United States federal income tax purposes and under applicable United States state and local, as well as foreign and other, tax laws. Assura Shareholders are urged to consult their independent professional advisers immediately regarding the tax consequences of the Acquisition applicable to them.
It may be difficult for US Assura Shareholders to enforce their rights and claims arising out of the US federal securities laws, since Bidco and Assura are located in countries other than the US, and some or all of their officers and directors may be residents of countries other than the US. US Assura Shareholders may not be able to sue a non-US company or its officers or directors in a non-US court for violations of US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's jurisdiction and judgement.
In accordance with normal UK practice and pursuant to Rule 14e-5(b) of the US Exchange Act, Bidco, certain affiliated companies and their nominees or brokers (acting as agents) may make certain purchases of, or arrangements to purchase, shares in Assura outside of the US, other than pursuant to the Acquisition, until the date on which the Acquisition and/or Scheme becomes Effective, lapses or is otherwise withdrawn. Also, in accordance with Rule 14e-5(b) of the US Exchange Act, each of Jefferies, Barclays and Stifel will continue to act as a connected exempt principal trader in Assura Shares on the London Stock Exchange. If such purchases or arrangements to purchase were to be made they would occur either in the open market at prevailing prices or in private transactions at negotiated prices and comply with applicable law, including the US Exchange Act. Any information about such purchases or arrangements to purchase will be disclosed as required in the United Kingdom, will be reported to a Regulatory Information Service and will be available on the London Stock Exchange website at www.londonstockexchange.com.
Inside Information
This Announcement contains inside information as defined in the UK version of the Market Abuse Regulation (EU) No.596/2014, which is part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this Announcement via a Regulatory Information Service, such inside information will be considered to be in the public domain.
Forward looking statements
This Announcement (including information incorporated by reference in this Announcement), oral statements made regarding the Acquisition, and other information published by KKR, Stonepeak, Bidco or Assura contain statements about Bidco, Assura, any member of the Wider Bidco Group or any member of the Wider Assura Group that are or may be deemed to be forward looking statements. All statements other than statements of historical facts included in this Announcement may be forward looking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "shall", "should", "anticipates", "estimates", "projects", "is subject to", "budget", "scheduled", "forecast" or words or terms of similar substance or the negative thereof, are forward looking statements. Forward looking statements may include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Bidco's, KKR's, Stonepeak's, Assura's, any member of the Wider Bidco Group's or any member of the Wider Assura Group's operations and potential synergies resulting from the Acquisition; and (iii) the effects of global economic conditions and government regulation on Bidco's, KKR's, Stonepeak's, Assura's, any member of the Wider Bidco Group's or any member of the Wider Assura Group's business.
Such forward looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Bidco and Assura about future events and are therefore subject to risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statements, including: increased competition, the loss of or damage to one or more key customer relationships, changes to customer ordering patterns, delays in obtaining customer approvals for engineering or price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the timing and success of future acquisition opportunities or major investment projects. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward looking statements. Such forward looking statements should therefore be construed in the light of such factors. Neither Bidco, KKR, Stonepeak, Assura, the Wider Bidco Group nor the Wider Assura Group, nor any of their respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward looking statements in this Announcement will actually occur. Due to such uncertainties and risks, readers are cautioned not to place any reliance on such forward looking statements, which speak only as of the date hereof. All subsequent oral or written forward looking statements attributable to any member of the Wider Bidco Group or the Wider Assura Group, or any of their respective associates, directors, officers, employees or advisers, are expressly qualified in their entirety by the cautionary statement above.
Bidco, KKR, Stonepeak, Assura, the Wider Bidco Group and the Wider Assura Group expressly disclaim any obligation to update any forward looking or other statements contained herein, except as required by applicable law or by the rules of any competent regulatory authority, whether as a result of new information, future events or otherwise.
No profit forecasts, profit estimates or quantified financial benefits statements
No statement in this Announcement, or incorporated by reference in this Announcement, is intended as a profit forecast, profit estimate or quantified financial benefits statement for any period and no statement in this Announcement should be interpreted to mean that earnings or earnings per share for Assura for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for Assura.
Rule 26.1 Disclosure
In accordance with Rule 26.1 of the Code, a copy of this announcement will be available (subject to certain restrictions relating to persons resident in restricted jurisdictions) at www.documentdisplay.co.uk by no later than 12 noon (London time) on the business day following the date of this announcement. The content of the website referred to in this announcement is not incorporated into, and does not form part of, this announcement.
This announcement has been prepared in accordance with English law and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.
Sources and bases of information
1) The European Real Estate Association (EPRA) - Monthly LTV Monitor, May 2025 (UK average for April 2025 of 29.68%)
2) Assura plc 2024 Annual Report - Note 16, Borrowings, points 3 and 4
3) Assura plc 2024 Annual Report - Note 16, Borrowings, point 1
4) The European Real Estate Association (EPRA) - Monthly NAV Bulletin, February 2025
END
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