- PHP offer has edged slightly ahead
- Deal could include October dividend
- Firm rejects ‘financial risk’ claim
The ongoing tussle between a consortium led by US buyout firm KKR (KKR:NYSE) and UK primary health care property owner PHP (PHP) for control of Assura (AGR) took yet another turn today with PHP upping the stakes.
By mid-morning, shares in Assura were unchanged at 49.9p while PHP shares were very slightly lower at 102.8p.
‘BEST AND FINAL’ OFFER
Earlier this week, KKR said the consortium would make a ‘best and final’ offer for Assura of 50.42p in cash, plus two 0.84p quarterly dividends, one paid in April and the other due in July, making a total offer price of 52.1p.
That represents an increase of 2.7p per Assura share from its initial offer in April and values the UK firm at £1.7 billion, a 39% premium to its valuation on 13 February, the day before Assura revealed it had received an offer.
It also tops the offer from PHP in May of 12.5p per share in cash plus 0.3769 new shares, which at the time valued Assura at 51.7p per share of £1.68 billion.
Today, PHP raised the fact that at current prices its offer values Assura at 53p per share including dividends, and furthermore, it would not reduce the offer were the Assura board to declare a special dividend of up to 0.84p per share in lieu of its scheduled October payout.
It also reduced the threshold for acceptance of its offer to ‘more than 50% of the voting rights normally exercisable at a general meeting of Assura shareholders’, which puts it in line with the offer from the private equity consortium, giving a greater chance of success.
‘CLEAR PLAN’
The Assura board has maintained the cash element of the PHP offer would result in a level of leverage ‘significantly exceeding’ the target loan-to-value ratios of both companies and around £2 billion of refinancing needs in the next two to three years, creating financial risk.
In response, PHP argues it has a clear plan to reduce leverage, while targeting a strong investment-grade credit rating, and claims the majority of Assura’s existing lenders ‘would prefer to see a combination with a more transparent and robust corporate governance structure rather than the uncertainty and opaque structure typical of private equity transactions’.
In terms of deal risk, PHP says following its own analysis it does not believe there are any substantive competition issues or overlaps in the relevant jurisdictions, and Assura needs to provide its own documentation to the CMA so approval can be obtained as quickly as possible.
Disclaimer: The author (Ian Conway) owns shares in Assura
