After a hard-fought contest with KKR, PHP won the Assura takeover saga. Unusually, the offer mix-and-match split was disclosed hours before the offer deadline, signalling a large arbitrage opportunity was still available; the unconditional RNS omitted the same details but showed fund managers actively sought a materially worse deal for their investors.
Primary Health Properties’ all-share-and-cash takeover of Assura closed with an unusual disclosure cadence that mattered for price-sensitive risk arbitrager and for pension investors’ value. At 1 pm on 12 August, before the acceptance deadline, PHP published a “Day 59” update stating that 33.7% of acceptances (equivalent to 12.2% of Assura’s issued share capital) had elected “more shares” and 16% (about 5.8% of Assura’s issued share) had elected “more cash”, with the warning that elections could be scaled pro-rata depending on offsetting demand. A few hours later, the offer was declared wholly unconditional, with acceptance reaching 62%. The mix-and-match facility was closed, but the unconditional notice did not repeat with the same transparency as the crucial pre-close split.
Final entitlements subsequently published set the consideration at 0.5073 PHP shares per Assura share for “more shares” (no cash), 0.3238 PHP shares plus 18.9878 pence for “more cash”, and a base package of 0.3865 PHP shares with 12.5 pence; holders on the register at 6:00 p.m. on 12 August also receive a 0.84 pence special dividend. With PHP closing at 93.3 pence on 13 August, the day it became unconditional, those terms equate to 48.16 pence for “more shares”, 49.4 pence for “more cash”, and 48.7 pence for the no-election standard offer, making the “more shares” path the lowest-value outcome at prevailing prices.
Effectively, Assura shareholders electing for more shares decided to buy these at 103.5 pence, about 10 pence more than prevailing market prices. The pre-close disclosure, rare in its granularity, signalled a cash election shortfall that should have favoured further cash elections and would have enticed risk arbitrageurs; nevertheless, many managers actively chose the least good deal for their investors.
Sue Noffke, head of UK Equities, Schroders who owned 5.1% of Assura’s shares, told us: “We opted for more shares in this deal as we are positive on the future potential, such as through cost and revenue synergies, to come from putting the two healthcare businesses together. We also believe there is the prospect of future rent growth, which will benefit net asset value and the share price in time.”
The takeover follows a months-long bidding war between KKR and Stonepeak’s Sana Bidco, whose best-and-final all-cash proposal was 50.42 pence per share, with shareholders also retaining Assura’s 0.84 July payouts, about 51.26 pence headline.
PHP secured acceptances for roughly 62.9% of Assura shares, while the CMA opened a standard review. Public backers of the listed route included Quilter Cheviot, Schroders and Allianz Global Investors, with Baillie Gifford and Aberdeen also reported as supportive.
Analyst Oli Creasey, real estate analyst for Quilter Cheviot, who owned 2.9% of Assura, supported the deal and believes the shares “look like they are the wrong price”. When asked about why the company did not buy more shares in the market, he said: ”My sincere concern was that the liquidity would not exist to do that easily.”
Baillie Gifford, which published a letter strongly opposing the KKR deal and owned about 1% of Assura, declined to comment.
PHP did not reply to our request for further information. A Schroders spokesman told us []
Advisers to PHP included Rothschild & Co and Deutsche Numis as joint lead financial advisers, and joint broker for Deutsche Numis, alongside Citi and Peel Hunt.
On the other side of the Chinese wall, a sell-side analyst at Peel Hunt James Carswell, said the victory for PHP was a “win-win” situation for both Assura and PHP shareholders.
Fund managers who were so adamant about the value of the deal should do well bidding for PHP stock at the current 10% discount to the offer they actively elected for, or pension investors might question how good a deal for them it has been.
