NHS Property Giant Assura Opts for PHP Merger in £1.7 Billion Pound Deal

In a significant shift of strategy, Assura, one of the NHS’s largest property landlords, has chosen to merge with Primary Health Properties (PHP) rather than accept a private equity buyout. The decision comes after mounting pressure from shareholders, leading to the rejection of a £1.64 billion offer from American firms KKR and Stonepeak Partners.

PHP’s cash-and-shares proposal initially valued Assura at £1.8 billion, though this figure has slightly decreased to £1.7 billion following a 4.2 per cent decline in PHP shares to 99.25p. The structure of the deal includes £460 million in cash, with the remainder paid in PHP shares, granting Assura shareholders a 48 per cent stake in the merged entity.

The Manchester-based Assura, established in 2003, currently manages a portfolio of over 600 healthcare buildings valued at £3.2 billion. Its prospective partner, PHP, owns 516 medical facilities across England, Scotland and Ireland. Together, these properties generated £333 million in rental income last year, with approximately 85 per cent backed by UK and Irish governments.

Ed Smith, Assura’s chairman, explained the board’s change of heart, noting that PHP had addressed previous risk concerns. The merger has received strong support from major shareholders, including Schroders, Aberdeen Investments, and TR Property Investment Trust, who favour the potential for long-term value creation over an immediate private equity exit.

Industry analysts have largely endorsed the decision. Bjorn Zietsman from Panmure Liberum described PHP’s offer as “clearly superior” in both economic and strategic terms, while Shore Capital’s Andrew Saunders characterised the merger as “the sensible outcome”.

The timing of this merger appears particularly strategic, coinciding with early signs of recovery in property valuations and anticipated increases in healthcare facility rents, driven by the UK’s ageing population. The combined entity is positioned to capitalise on these demographic trends while maintaining its crucial role in supporting NHS infrastructure.