KKR urges Assura to reconsider PHP offer as CMA begins phase 1 probe

(Sharecast News) - The Assura takeover saga continued on Friday as private equity firm KKR released a statement urging the NHS landlord to reconsider its decision to accept a £1.79bn takeover offer from Primary Health Properties. KKR said that since the board's recommendation of the revised PHP offer, a number of factors have reduced its attractiveness.

KKR said it has engaged with Assura's board over the last few days to request that it change its recommendation in favour of the private equity firm.

It said its offer delivers a higher monetary value, full certainty and risk-free value in the form of cash, no execution risk in relation to asset sales required to reduce the over-leverage of the combined PHP-Assura entity, and no competition or antitrust risk.

It pointed to the fact the Competition and Markets Authority has an ongoing inquiry into Assura's acquisition by PHP.

"Bidco is able to provide the strongest ongoing stewardship for Assura, its team and all stakeholders including investing in NHS infrastructure," KKR said.

On price alone, it said, its best and final cash offer is 1.1% higher than the revised PHP offer after a drop in the share prices of both Assura and PHP since their deal was recommended.

The PE firm pointed out that Assura's share price has fallen over the last few days. On Thursday, it closed at 48.98p, meaning that KKR's current 50.42p per share offer represents a 2.9% premium to the share price.

"Despite this, there appears to have been no buying activity from investors who have expressed support to the potential combination of PHP and Assura and who therefore should see this as an opportunity to buy into Assura at a depressed valuation," KKR said.

"Given this, it is unclear where further buying support for the potential combined entity could come from, if the revised PHP offer is successful."

The statement from KKR came as the CMA said on Friday that it has decided to investigate PHP's takeover of Assura to see whether it will lead to a "substantial lessening" of competition.

Noting the announcement from KKR, Assura said: "The Assura directors continue to consider that the terms of the increased PHP offer are in the best interests of Assura shareholders and accordingly continue to recommend unanimously that Assura shareholders accept, or procure the acceptance of, the increased PHP offer."

Broker Shore Capital said PHP is the best choice for Assura shareholders.

Analyst Andrew Saunders said: "PHP and Assura both look well positioned to deliver attractive rental growth along with combined overheads running £10m lower in FY26F in our view. The combined financing costs should also benefit from new debt issuance at lower credit margins and disposals into a new joint venture helping to reduce debt.

"Collectively, we are forecasting the enlarged PHP business to see earnings accretion of at least 4% in FY26F from 7.3p to 7.6p per share - 100% of which flows to dividends. Again, we believe PHP shares currently present a very attractive value opportunity and we reiterate our buy recommendation and advise Assura shareholders to accept its offer - which we also believe will be beneficial to critical UK infrastructure, the UK stock market, the delivery of healthcare in the UK and Ireland and therefore society at large in the British Isles."

As far as the CMA probe is concerned, Saunders said: "This is to be expected although we have no concerns here as neither Assura or PHP set their own rents (mostly done by District Valuers - part of HMRC) and therefore neither have little ability to influence anti-competitive rents or behaviour."

Panmure Gordon said: "We continue to believe PHP's share-and-cash offer for AGR is the superior choice for shareholders, providing immediate value and ongoing participation in the long-term upside from creating the UK market leader in primary healthcare real estate."

Analyst Bjorn Zietsman said: "The central reason to support PHP's offer is that it allows Assura shareholders to participate in the substantial long-term value creation from combining the two leading UK primary healthcare REITs. The merged entity would be the clear sector leader, with a larger, more diversified portfolio, stronger financing capacity, and enhanced operational efficiency.

"Bidco's claimed 1.1% price premium is immaterial relative to the daily volatility of either company's shares and pales in comparison to the incremental rental income growth, cost savings, and valuation re-rating potential available to PHP-Assura shareholders over time."