KKR raises offer for Assura edging closer to acquisition approval

The American private equity group KKR, in collaboration with Stonepeak Partners, has increased its bid to acquire Assura, the NHS landlord, raising its offer to £1.7 billion. This revised bid marks an additional £100 million from its previous proposal and represents 52.1 pence per Assura share. In a move to secure shareholder support, the Assura board announced its recommendation of KKR’s offer, favouring the certainty of an all-cash deal over rival proposals.

Primary Health Properties (PHP), a competitor in the health property sector, submitted a higher valuation of 52.6 pence per share. However, this alternative comprises only £410 million in cash, with the remainder in PHP shares. PHP’s proposal gives Assura stakeholders a potential 48 per cent stake in a merged entity but includes what the Assura board describes as significant “execution risk.”

Assura’s chairman, Ed Smith, emphasised the board’s thorough assessment of both proposals, stating confidence in KKR and Stonepeak’s ability to support and invest in the healthcare infrastructure that communities rely upon. Smith highlighted that PHP’s offer, despite its higher theoretical value, would result in a leveraged entity, potentially limiting future investment in NHS facilities.

While KKR’s bid has gathered momentum, industry analysts and shareholders remain divided. Some argue that healthcare property values are set to recover, alongside a projected increase in rental revenues due to the UK’s ageing population and growing demand for medical facilities. Critics believe KKR should offer a higher premium considering Assura’s careful curation of its £3.2 billion portfolio across 600 healthcare properties.

PHP’s counter-argument centres on the structural superiority of its offer, which brings long-term growth potential through a combined property portfolio of 1,116 healthcare buildings. However, Assura’s board pointed out that such a merger could hinder the rapid expansion necessary to meet future healthcare demands.

A meeting to formalise shareholders’ decision has yet to be scheduled, though it is expected in July. The dynamics of the offers changed as KKR adjusted its terms, reducing the approval requirement to over 50 per cent of shareholder backing. Previously, a 75 per cent approval threshold was necessary.

Industry observers will monitor the forthcoming vote closely. While KKR’s cash offer provides immediate certainty, stakeholders must weigh the opportunity costs of selling Assura’s assets during a period deemed by many as the bottom of the market cycle. Ultimately, the vote will underscore whether investors prioritise short-term gains or long-term strategic growth.