Assura rejects £1.56bn takeover offer from KKR

Assura, one of the UK’s largest owners of healthcare properties, has turned down a fourth takeover bid from US private equity giant KKR. The latest bid, submitted last week, valued the company at £1.56 billion, equating to 48p per share. This figure was at a 28 per cent premium to Assura’s recent share price but still 3 per cent below its net asset value.

Assura’s board rejected the offer on Saturday, holding firm in its belief that the bids undervalue the company. KKR, which has been pursuing Assura for months, has stated that it is now reassessing its strategy. While it is unclear whether another bid will materialise, analysts suggest this is unlikely to be the last attempt to acquire Assura. With growing demand for healthcare facilities, the group’s portfolio of over 600 properties, largely leased to the NHS, remains highly attractive.

Assura generates £179 million in annual rent with nearly 80 per cent of income backed by NHS funding. Its recent financial results revealed a pre-tax profit of £77.1 million for the six months to September 2024, bolstered by a £25.4 million increase in property valuations. Despite these strong fundamentals, Assura’s shares have been trading at a significant discount to their net asset value due to wider negativity around the commercial property sector.

Rising interest rates and a challenging economic climate have dented the valuation of commercial real estate across the board. Even landlords not involved in offices or retail, such as Assura, have seen their stock market performance decline. Before KKR’s interest emerged, the shares were trading 21 per cent below net asset value.

KKR and other opportunistic investors are taking advantage of these market dynamics. Buying real estate-heavy companies like Assura at a discount to their property valuations is an appealing proposition. Analysts suggest Assura may also attract interest from additional bidders, with speculation that other property investors or funds could emerge as suitors.

The bid from KKR included a partnership with the Universities Superannuation Scheme, which had previously collaborated with Assura on a £250 million portfolio of medical centres. Despite USS withdrawing its support for the bid, the potential for future consolidation in the sector remains strong as investors search for undervalued assets in a competitive market.