The bidding war for Assura has taken another turn, with Kohlberg Kravis Roberts and Stonepeak Partners tabling an improved offer.

Under the terms of the ‘best and final’ offer, which has been recommended by Assura’s board, Assura shareholders will receive 50.42p in cash plus retain two quarterly interim dividend of 0.84p (one paid on 9 April and one due to be paid on 9 July).

The offer therefore implies a total value of 52.1p, valuing Assura at £1,696m. This represents a premium to Assura’s EPRA net tangible assets (NTA) per share of 50.4p as at 31 March 2025 and a 39.2% premium to Assura’s closing price of 37.4p on 13 February 2025 (the last business day prior the commencement of the offer period)

Ed Smith, non-executive chair of Assura, commented: “The Board’s decision to recommend the offer from KKR and Stonepeak follows a careful and thorough evaluation of both offers, during which the Board has been firmly focused on its fiduciary duty to shareholders. KKR and Stonepeak are highly experienced investors in healthcare and infrastructure and I am confident that with their support, and the additional capital they will provide, Assura will continue to deliver the high-quality healthcare infrastructure our communities need.”

Recommendation

Assura’s directors said that they consider that the terms of the offer to be in the best interests of Assura shareholders as a whole and intend to unanimously recommend shareholders accept the offer. Directors have irrevocably undertaken to do so in respect of their own holdings, being in aggregate 4,638,828 or 0.1%.

The board added that it believes the offer represents a compelling opportunity for Assura shareholders to achieve a significant realisation of their investment in Assura at a higher value, and at materially less risk, than the PHP offer.

The PHP offer

Assura’s board has concluded that the PHP offer presents material risks and downsides to Assura shareholders which undermine the potential benefits of the proposed combination under the PHP offer, including:

• Financial risk – the cash element of the PHP offer would result in a level of leverage significantly exceeding the target loan-to-value ratios of both Assura and PHP. In addition, the combined group would face approximately £2bn of refinancing obligations over the next two to three years arising from the acquisition facilities and the near-term maturities of existing in-place debt across both Assura and PHP. The increased leverage and these near-term maturities expose Assura Shareholders to adverse changes in financing costs which could negatively affect the earnings profile of the combined group.
• Execution risk – the Assura Board notes the intention of PHP to reduce leverage of the combined group through asset disposals, including that of Assura’s portfolio of UK private hospitals. The Assura Board, with the benefit of its experience in conducting disposals and knowledge of the relevant private hospital market, has considered this plan in detail and is concerned about the execution risk associated with the required size and timing of these disposals and the acceptability of the terms that might be available to the combined group especially under the PHP stated joint venture disposal structure.    
• Reduced exposure to long-dated, inflation-linked leases – Following Assura’s successful strategic pivot towards becoming a more diversified healthcare REIT investing in a range of healthcare assets, Assura’s and PHP’s strategies have diverged. While Assura has diversified its portfolio by expanding into the private healthcare market, targeting longer-term, inflation-linked leases, PHP has remained focused on public sector surgery properties. A combination with PHP, together with the planned disposals of Assura’s private hospital assets, would significantly dilute Assura Shareholders’ exposure to private healthcare assets, the majority of which benefit from long-dated inflation-linked leases which provide greater certainty of rental growth than OMR leases. The portfolio of the combined group would be more weighted towards shorter length (on average) OMR leases, which have historically seen lower rental growth than inflation.
• Impact on Assura asset quality, growth prospects and ability to support the NHS – The limitations placed on the combined group by its elevated leverage and by the need to undertake significant asset disposals would, the Assura Board believes, restrict both investment and development expenditure, as well as reduce Assura’s ability to maintain, upgrade and modernise its older assets with the consequential impact on earnings growth of the combined group. As such, the Assura Board believes that the PHP Offer would impact the ability of the combined business to support the NHS in respect of the assets it needs in order to deliver critical services to its patients.
• Integration risks – The Assura Board has considered the risks and implications of undertaking significant portfolio disposals and refinancing activities at the same time as integrating the two businesses to deliver PHP’s estimated annualised run-rate cost synergies of approximately £9m. The Assura Board believes these concurrent activities would introduce heightened execution risk and operational disruption with corresponding financial uncertainty. Finally, while the Assura Board notes that CMA clearance is not a condition of the PHP Offer, Assura Shareholders would still bear a risk in this regard as an extended review would risk delaying PHP’s disposal programme.

[QD comment: We now wait to see if PHP come back with an improved offer. It seems clear that Assura’s board is set on the KKR deal, which gives shareholders certainty and a premium to NAV. One option for those shareholders wanting to retain exposure to the UK healthcare sector, which presents favourable long-term growth dynamics, could be to use the cash from the deal to buy into PHP.]