Primary Health Properties makes £1.7bn offer to acquire Assura Plc

Why Is Primary Health Properties Acquiring Assura Plc?

Primary Health Properties Plc has announced a £1.68 billion cash-and-shares offer to acquire the entire issued and to-be-issued share capital of Assura Plc. This significant consolidation move between the two largest UK-listed healthcare-focused REITs comes as part of a strategic push to create a scaled-up, sector-leading platform in social infrastructure. The acquisition is structured under Part 28 of the UK Companies Act 2006 as a takeover offer and includes 0.3769 new PHP shares and 12.5 pence in cash for every Assura share. Inclusive of dividend entitlements from Assura’s April and July 2025 distributions, the transaction implies a total consideration of 51.7 pence per share, based on PHP’s 15 May closing price of 99.5 pence. This values Assura at approximately £1.68 billion.

The offer comes at a time when healthcare real estate is gaining investor favour due to its government-backed rental streams and resilience amid macroeconomic uncertainty. PHP’s proposed acquisition aims to combine two complementary portfolios into a larger, more liquid and institutionally attractive platform focused on the growing demand for primary healthcare infrastructure in the UK.

What Strategic Value Will the Combined REIT Offer?

The merged entity would own a combined £6 billion portfolio of healthcare real estate assets, principally let to the NHS and other UK healthcare providers under long-term leases. This alignment with public healthcare priorities positions the combined REIT to benefit from the government’s strategic shift from secondary to community-based care, a trend further reinforced by the forthcoming 10-year NHS infrastructure investment plan. The increased scale is expected to deliver improved public market visibility, greater index inclusion, and enhanced access to institutional capital pools.

PHP believes that bringing together two property portfolios of similar focus but different geographic and lease profile strengths will diversify income streams, extend asset longevity, and enhance rent review mechanisms. The PHP board estimates annual pre-tax cost synergies of approximately £9 million, expected to be realised fully by the end of the first full financial year post-completion. The combination also aims to lower the EPRA cost ratio to one of the most competitive in the UK REIT space, reflecting operating efficiency and scalability.

How Does PHP’s Offer Compare to the KKR-Stonepeak Cash Bid?

PHP’s offer not only exceeds the value of the Consortium’s earlier all-cash bid of 49.4 pence per share but also includes additional upside through equity participation and dividend retention. The PHP offer reflects a 4.7% premium over the Consortium’s bid and a 38.2% premium over Assura’s share price on 13 February 2025, the last business day prior to the announcement of the offer period. It also represents premiums of 40.1% and 36.8% over the one-month and three-month volume-weighted average prices of Assura’s shares, respectively.

In contrast to the Consortium’s reliance on historic EPRA NTA valuations from 30 September 2024, PHP’s bid acknowledges the intrinsic value of Assura’s existing platform, including its low-cost fixed-rate debt facilities, embedded rental uplift potential, and accumulated back rent from unresolved rent reviews. Furthermore, PHP does not intend to adjust the offer if the July 2025 Assura dividend is paid, while the Consortium has reserved the right to reduce its offer accordingly.

PHP’s board has openly criticised the cash offer for undervaluing Assura’s strategic potential at a time when REIT valuations are bottoming out. The board has pointed out that recent improvements in interest rate outlook and construction cost normalization are likely to result in upward revaluations of healthcare property assets in the near term. By offering Assura shareholders a stake in the enlarged REIT, PHP enables them to participate in this expected sectoral recovery.

Why Are Analysts and Investors Supporting the PHP Bid?

Investor sentiment since the start of the offer period appears to lean in favour of PHP’s strategic bid. PHP’s share price has increased 10.5% since the announcement of the offer period, reflecting growing investor confidence in the transaction’s value-creation potential. Market participants have pointed to the strength of the enlarged platform, the highly secure nature of government-backed lease income, and the attractiveness of earnings accretion driven by cost synergies and increased scale.

Analysts note that the REIT sector in the UK is undergoing a phase of consolidation, driven by increasing investor focus on liquidity, capital efficiency, and operating leverage. The combination of PHP and Assura aligns with this trend, positioning the new entity as a top-tier REIT by market capitalization and dividend reliability. The proposed Mix and Match facility, allowing Assura shareholders to adjust the proportion of cash and shares they receive, is also seen as a positive step towards accommodating different investor profiles.

What Is the Broader Market Context for This Transaction?

The transaction comes at a pivotal moment for the UK commercial real estate sector. REITs have faced a challenging macro backdrop, with inflation-driven interest rate hikes, stagnant rental growth, and falling valuations weighing on sector performance. However, healthcare infrastructure has demonstrated notable resilience during this downturn, supported by its essential service nature, long lease tenures, and government-backed rental agreements.

Policy initiatives by the UK Government to shift services out of hospitals and into primary care settings have driven sustained demand for fit-for-purpose healthcare assets. Both PHP and Assura are aligned with this long-term structural theme. The merger, thus, is not only financially accretive but strategically aligned with public health infrastructure needs. PHP’s management has suggested that the inflection point in valuation yields has been reached, and the combined group is well-positioned to capitalise on a re-rating in sector multiples as macro conditions improve.

Will the Deal Be Funded Without Diluting PHP’s Financial Strength?

PHP has confirmed that the cash component of the offer will be financed through a new debt facility, secured from a syndicate of lenders. This facility is expected to support the full cash consideration without compromising the group’s investment-grade credit rating or leverage ratios. PHP has a history of conservative financial management, and both it and Assura possess embedded value in their respective long-term debt arrangements, with marked-to-market benefits of 9.4 pence per share and 5.5 pence per share, respectively.

The combined entity’s access to capital markets is expected to improve significantly, both in terms of equity and debt. Analysts have highlighted the potential for a lower cost of capital post-merger, driven by improved liquidity, scale, and investor visibility. The long-term benefits of enhanced financial flexibility, stronger credit metrics, and cost synergies are expected to outweigh the initial dilution from share issuance.

What Will Happen to Dividends Following the Merger?

PHP has assured that Assura shareholders will retain the declared April and July 2025 dividends, totalling up to 1.68 pence per share. PHP also intends to maintain its progressive dividend policy, with expected distributions in August and November 2025. If the transaction completes before the PHP August dividend ex-date, the board reserves the right to accelerate its payout to ensure equitable distribution.

The enlarged group will continue with a quarterly dividend payout strategy. Given the projected earnings accretion and cost synergies, analysts expect the combined REIT to sustain and potentially increase dividends in the medium term, aligning with shareholder expectations for stable, inflation-hedged returns.

What’s Next in the Offer Timeline?

PHP intends to publish the Offer Document, Form of Acceptance, and Combined Circular and Prospectus within 28 days of the announcement. These documents will provide full transaction details, election options, and expected timelines for completion. The transaction is structured as a takeover offer under the UK Takeover Code, though PHP has reserved the right to switch to a Scheme of Arrangement, should it offer procedural advantages.

The offer is not subject to antitrust or merger control clearances, which simplifies execution. Subject to shareholder approvals and regulatory formalities, the transaction is expected to complete in the third quarter of 2025. Assura shareholders are urged to review the Offer Documents once available, as they will contain material information regarding their rights and options.

What Are the Expected Outcomes of the Deal?

Following completion, Assura shareholders will own approximately 48% of the enlarged group, allowing them significant influence over the combined REIT’s future direction. The new entity is expected to deliver scale-driven efficiencies, increased index inclusion potential, and improved public market liquidity.

The merger also increases the capacity to undertake larger development and asset management initiatives, particularly those aligned with NHS strategic goals. Sector analysts anticipate this transaction will encourage further consolidation within healthcare REITs and other social infrastructure platforms, as investors seek yield stability, inflation hedging, and predictable income streams in a structurally defensive asset class.