TIDMPHP
RNS Number : 1425I
Primary Health Properties PLC
10 December 2020
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE MARKET ABUSE REGULATION (EU NO. 596/2014).
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY IN, INTO OR FROM, ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF
SUCH JURISDICTION.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS OR
PROSPECTUS-EQUIVALENT DOCUMENT AND INVESTORS SHOULD NOT MAKE ANY
INVESTMENT DECISION IN RELATION TO THE PRIMARY HEALTH PROPERTIES
PLC SHARES EXCEPT ON THE BASIS OF THE INFORMATION IN THE CIRCULAR
TO BE PUBLISHED BY PRIMARY HEALTH PROPERTIES PLC IN CONNECTION WITH
THE PROPOSALS SET OUT IN THIS ANNOUNCEMENT.
FOR IMMEDIATE RELEASE
10 December 2020
Primary Health Properties PLC
("PHP", the "Group" or the "Company")
Proposed acquisition of Nexus and management internalisation
Cost savings to drive immediate earnings enhancement as PHP
positions for next stage of growth
The Board of PHP (the "Board") announces that it has entered
into a conditional share purchase agreement, subject to shareholder
approval, to internalise the Company's management function (the
"Internalisation") by acquiring Nexus Tradeco Holdings Limited
which is the holding company of its longstanding external property
adviser Nexus Tradeco Limited and certain subsidiaries, including
Nexus's primary care development business (together "Nexus") (the
"Acquisition"). PHP has agreed to acquire the entire issued
ordinary share capital of Nexus Tradeco Holdings Limited for a
total consideration of GBP33.1 million (subject to a completion net
assets adjustment), made up of GBP16.55 million payable in cash and
GBP16.55 million satisfied by the issue of 11,485,080(1) new
ordinary shares of 12.5 pence each in the share capital of PHP at a
price of 144.1 pence per share.
The Board believes that there are a number of compelling
financial and strategic benefits of the Acquisition, as the
Internalisation is expected to result in immediate and longer-term
Adjusted EPRA EPS enhancement, with some minor one-off EPRA NAV
dilution. The Board further believes that the Internalisation
will:
-- Secure a structure that is more appropriate to a UK-REIT of
the scale of PHP which will broaden interest in the investment
community, reduce costs and improve Shareholder returns;
-- Help to secure the continuity of the well-regarded and
experienced Nexus management team; including the services of Harry
Hyman as CEO of PHP from completion of the Acquisition, consistent
with the commitments he made at the time of the MedicX merger;
and
-- Enhance management succession for the Group for the longer-term.
Financial benefits:
-- The Company is anticipating achieving annual cost savings of
approximately GBP4.0 million following completion of the
Acquisition as a result of the Internalisation.
-- Material Adjusted EPRA EPS enhancement expected from the
Acquisition following completion of the Acquisition, giving further
scope for increased dividends.
-- The Company will assume Nexus's existing management and
overhead costs which are anticipated to result in lower ongoing
administrative costs to the Company and the EPRA cost ratio, which
is already among the lowest in the sector, is therefore expected to
fall further.
-- The delinking of the Company's administrative costs from its
gross asset value will provide further cost benefits as the gross
asset value of PHP's portfolio is anticipated to grow in the
future.
-- Potential for the Company's equity valuation to be enhanced
and its cost of capital to be reduced.
Strategic benefits:
-- Acquisition by the Group of a fully operational management
platform with the transfer of the systems, know-how and proprietary
market knowledge that Nexus has developed since 1996.
-- Helps to secure a well-regarded and experienced management
team who have a deep understanding of both the sector and the
portfolio assets.
-- Secures control of the pipeline of opportunities that Nexus
has been evaluating, including those developments being pursued by
Nexus Developments.
-- Succession planning, operational security and long-term
stability is expected to be enhanced as a result of the
Internalisation.
-- Confers operational benefits with a simpler decision-making
process and a more transparent and accountable management
structure.
-- Integration of the Nexus team expected to be straightforward
given the existing arrangements with Nexus.
-- Removes potential or perceived conflicts of interest between
Nexus and PHP and reliance on Nexus as a third party adviser.
-- An internally managed structure is expected to appeal to more
investors, in particular those investors unwilling or unable to
invest in externally managed vehicles, thus broadening the universe
of potential investors in the Company.
The Board believes that now is also the appropriate time to
acquire the development expertise and pipeline of Nexus which will
allow PHP to bring forward future primary care developments
utilising its own balance sheet. The Board believes that momentum
is growing in the NHS for the approval of new medical centre
developments and, if PHP has its own capabilities in development,
it will be a more attractive partner for such new development
opportunities.
The Board believes that the Internalisation will further benefit
the long-term future of the business and help underpin the next
stage of the Company's growth.
Commenting on the Acquisition Steven Owen, Chairman of PHP
said:
"We believe that now is the right time to internalise this
relationship and secure the well-regarded people, systems and
structure of the Nexus operations, in a move which will deliver
material financial and operational benefits to PHP. The new
structure will deliver material annual cost savings, driving
immediate EPRA EPS enhancement to further shareholder returns,
whilst simultaneously broadening our appeal to a wider investment
community.
"Exacerbated by the disruption seen this year, demand for new
and improved primary care centres to alleviate pressure on
hospitals and A&E departments is at an all-time high. We
believe that acquiring Nexus will help position PHP to play a key
role in these opportunities, underpinning the next stage of the
Company's growth and benefitting the long-term future of the
business."
PHP expects to publish a Circular in connection with the
Acquisition on or around 11 December 2020 which will contain a
notice convening a General Meeting to be held on 4 January 2021 to
approve certain matters necessary to implement the Acquisition. As
will be set out in the Circular, at the General Meeting the Board
is also proposing the adoption of a new directors' remuneration
policy, which will provide a framework for the remuneration
arrangements of the executive directors following completion of the
Acquisition (the "New Policy"), as well as separately proposing the
adoption by the Company of new articles of association (the "New
Articles") with changes primarily relating to the holding of
virtual shareholder meetings and updating for changes to market
practice and law (together with the Acquisition, the New Policy and
the New Articles, the "Proposals"). The Board considers the
Proposals to be in the best interests of PHP and the Shareholders
as a whole. Accordingly, the Independent Directors, unanimously
recommend that Shareholders vote or procure votes in favour of the
Acquisition which will include adoption of the New Policy. All the
Directors unanimously recommend that Shareholders vote or procure
votes in favour of adopting the New Articles.
As Harry Hyman owns the entire ordinary issued share capital of
Nexus (other than the Preference Shares which are to be repurchased
by Nexus at completion of the Acquisition) and is a Director of the
Company, Harry Hyman and Nexus are considered to be related parties
of PHP for the purposes of Chapter 11 of the Listing Rules. Due to
its size under the Listing Rules, the Acquisition constitutes a
'smaller related party transaction' falling within Listing Rule
11.1.10R and, as such, does not require the approval of
Shareholders. The Acquisition however constitutes a 'substantial
property transaction' under section 190 of the Companies Act 2006
which requires that the Acquisition is conditional upon the
approval of Shareholders being obtained. This will be achieved by
the passing of the Acquisition Resolution to be set out in the
Notice of General Meeting set out in the Circular expected to be
published on or around 11 December 2020.
The expected timetable for the Acquisition is as follows:
Publication of Circular On or around 11 December
2020
Latest time and date for receipt of 10.30 a.m. on 30 December
Forms of Proxy 2020
General Meeting 10. 30 a.m. on 4 January
2021
Expected completion date of the Acquisition 5 January 2021(5)
Expected date of Admission and commencement 8.00 a.m. on or around
of dealings in the New Shares on the 6 January 2021(5)
London Stock Exchange
Notes:
(1) Number of new ordinary shares to be issued is determined by
the average PHP share price over the 20 business days preceding
this announcement, being a price of 144.1 pence per share, which
represents a 3.8% premium to PHP's closing share price on 9
December 2020 of 138.8 pence per share.
(2) The times set out in the expected timetable of principal
events above and to be mentioned throughout the Circular are times
in London unless otherwise stated, and may be subject to change, in
which event details of the new times and dates will be notified to
the FCA, the London Stock Exchange and, where appropriate,
Shareholders.
(3) Subject to certain restrictions relating to certain
Shareholders with registered addresses, or who are resident,
outside the UK.
(4) In light of mandatory measures imposed by the UK Government
relating to the COVID-19 pandemic, Shareholders will not be
permitted to attend the General Meeting in person. For further
information regarding the action to take in respect of the General
Meeting, see the Circular to be published on or around 11 December
2020 .
(5) These times and dates are indicative only and will depend
on, amongst other things, the date upon which the Condition is
satisfied.
Capitalised terms used in this announcement have the meanings
given to them in the Circular to be published in connection with
the Acquisition on or around 11 December 2020.
For further information contact:
Primary Health Properties PLC
Steven Owen, Chairman
Paul Wright, Company Secretary 020 7451 7050
Numis Securities Limited (Joint Sponsor, Financial
Adviser and Broker)
James Black / Kevin Cruickshank / Huw Jeremy 020 7260 1000
Peel Hunt LLP (Joint Sponsor, Financial Adviser
and Broker)
Capel Irwin / Carl Gough / Harry Nicholas 020 7418 8900
Buchanan
David Rydell / Steph Watson / Tilly Abraham 0207 466 5066
Legal Entity Identifier of the Company is: 213800Y5CJHXOATK7X11.
The person responsible for arranging the release of this
information is Nexus Management Services Limited, Company Secretary
to the Company.
This announcement is for information purposes only and does not
constitute an offer to sell or an invitation to purchase any
securities or the solicitation of an offer to buy any securities,
pursuant to the Proposals. Persons who wish to vote in favour of
the Proposals are reminded that such decision should only be made
on the basis of the information in the Circular to be published in
connection with the Proposals and not on the information contained
in this announcement.
This announcement may contain forward-looking statements.
Forward-looking statements contain the words "anticipate",
"believe", "intend", "estimate", "project", "forecast", "plan",
"expect", "will", "could", "may", "might", or words of a similar
meaning. By their nature, forward-looking statements involve risk
and uncertainty because they relate to future events and
circumstances. Actual outcomes and results may differ materially
from any outcomes or results expressed or implied by such
forward-looking statements. Nothing in this announcement is
intended to be, or intended to be construed as a profit
forecast.
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END
MSCEAEANEELEFAA
(END) Dow Jones Newswires
December 10, 2020 02:00 ET (07:00 GMT)
Primary Health Properties (LSE:PHP)
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Primary Health Properties (LSE:PHP)
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