Primary care specialist Primary Health Properties PLC (LON:PHP) is increasing the size of its portfolio to 479 properties worth £2.3bn through a merger with MedicX Fund (LON:MXF).
The merger values MedicX shares at 88.7p or £393mln in total. PHP shareholders will own 69% of the enlarged company.
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"The Enlarged Group will be more able to meet the increasing demand for high-quality primary healthcare facilities across the UK and the Republic of Ireland thereby supporting doctors, alleviating pressure on hospital departments and ultimately aiding the welfare of patients," said the statement.
The merger will result in costs saving of £4mln in the first year and lower financing charges further out.
Nexus, which advises PHP on its property portfolio, will take on a similar role for the enlarged group.
PHP added there is little geographic overlap between the portfolios, which both enjoy average lease terms of more than 12 years with over 90% of rents guaranteed either by the UK’s NHS or Ireland’s HSE.
Steven Owen, PHP’s chairman said: "The merger represents a major step forward in PHP's strategy which significantly extends the scale of our business and asset value."
All about scale
Nicholas Hyett, Equity Analyst at Hargreaves Lansdown commented: “PHP and MedicX both own and rent community healthcare facilities – particularly GP surgeries – in the UK and Ireland. This merger is all about scale, and the benefits that come with it.”
He added: “The most obvious benefits are £4m in cost savings – largely achieved by consolidating the property management contract under one roof, with some smaller cost savings round the edges.
“A larger group is also expected to open up some lower cost funding options, although the exact benefits of that have yet to be quantified, making expansion easier and giving the group greater flexibility when it comes to future expansion”
Hyett concluded: The price means the deal’s more immediately favourable to MedicX shareholders than PHP investors, but in the long run we think it makes sense for all involved.”
In late morning trading, PHP shares were 2.1% lower at 112.80p, while MedicX shares jumped 12.1% to 87p.
-- Adds analyst comment, share prices --