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Primary Health Properties acquires Apollo Medical Partners in £65m deal

Primary Health Properties (PHP) has acquired Apollo Medical Partners (AMP) for a total cost of £64.6 million, which includes a fixed cost debt of £49.8 million and transaction costs.

Primary healthcare facilities provider PHP will pay a consideration of approximately £10.2 million to acquire AMP. £4.2 million of the consideration is payable in cash on completion, £1.8 million in cash is deferred until the delivery of assets under construction and AMP’s vendors will receive 1,231,395 new ordinary shares of 50 pence each subject to a 12 month lock-in.

AMP owns 14 primary care properties across the UK, 11 of which are completed assets (10 constructed in the last five years) and the remaining three are due for completion between February and August 2013.

PHP’s acquisition represents a net initial yield of 5.9%.

The assumed fixed cost debt of £49.8 million has a weighted life of 18 years and PHP are looking to refinance the facility at a more attractive interest rate as soon as possible.

Brokerage Numis estimated that the acquisition would improve dividend cover from 60% to 67% in 2013, rising to 86% by 2014.

Numis added: “We are also encouraged that it brings a new strategic relationship for PHP which should provide access to a pipeline of future deals supporting management’s aim of returning to full dividend cover ‘at the earliest opportunity’.”

Harry Hyman, managing director of PHP, said: “This is an important acquisition for PHP which demonstrates our ability to acquire modern, well-let portfolios at cash yields ahead of the current portfolio net initial yield. The acquisition adds 14 high quality assets to our existing portfolio, boosts PHPs rental profits and is in line with management’s aim of returning to a full dividend cover at the earliest opportunity.”

PHP owns over 160 primary healthcare facilities, both completed and committed, with an average unexpired lease term of 16 years.

Sister companies of HealthInvestor have an interest in Primary Health Properties.

Source: HealthInvestor