KKR Nears $2.08 Billion Deal To Acquire British Landlord Assura

The Bidding War for Assura: A New Frontrunner Emerges

The race to acquire Assura, the British healthcare landlord, has taken a significant turn with the latest developments putting the U.S.-based consortium of KKR and Stonepeak Partners firmly in the driver’s seat. In a recent filing, KKR and Stonepeak Partners have upped the ante by submitting a non-binding, cash-only offer of 49.4 pence per share. This revised bid represents a substantial 32% premium to Assura’s share price before KKR’s interest became public in mid-February. This move not only surpasses their previous offer of 48 pence per share by 2.9% but has also shifted the balance in their favor, prompting Assura’s board to consider their proposal more seriously.

A Board’s Dilemma: Weighing Offers and Shareholder Interests

The board of Assura has made it clear that if a firm offer is presented under these improved financial terms, they would be inclined to recommend it to their shareholders. This stance indicates a significant shift from their previous rejections of KKR’s earlier bids. The new valuation of £1.61 billion ($2.08 billion) highlights the consortium’s determination to secure the deal, having previously seen four offers turned down. The board’s willingness to engage with KKR and Stonepeak suggests that they are under pressure to maximize shareholder value, while also considering the long-term implications for the company.

The Tactical Play of Bidding Wars: A Strategic Perspective

The dynamics of the bidding war for Assura reflect a common strategy in corporate takeovers where initial offers are often lower, with bidders adjusting their proposals based on the target company’s response. Russ Mould, Investment Director at AJ Bell, comments on this trend, noting that increased bids have become more frequent as bidders test the waters with lower offers before committing to higher figures. This approach allows bidders to gauge the target’s appetite and shareholder sentiment before making more substantial commitments.

Primary Health Properties: A Rival Bidder on the Sidelines

While KKR and Stonepeak Partners have garnered significant attention with their revised offer, Primary Health Properties (PHP) has also entered the fray with a non-binding, all-share merger proposal valuing Assura’s shares at 43 pence each. However, Assura’s board has deemed this offer less attractive compared to the cash proposal from KKR and Stonepeak, citing both higher value per share and reduced risk for shareholders. The door, however, remains open for PHP, with British takeover rules granting them until April 7 to present a firm offer. PHP has confirmed their interest and is currently evaluating their position, suggesting that they may still marshal a more competitive bid.

Market Reactions and Investor Sentiment

The financial markets have reacted positively to KKR and Stonepeak’s revised offer, with Assura’s shares experiencing a significant surge of up to 14% in early trading. However, the shares subsequently pared back some of these gains, reflecting a degree of skepticism among investors. Russ Mould points out that the current share price of 46.48 pence, which is below KKR’s offer, suggests that the market doubts whether PHP will return with a more enticing proposal. Additionally, the premium of 32% offered by KKR, while significant, is below the average 47% premium observed in U.K. takeovers in 2024, which may indicate that some shareholders feel the offer is not as attractive as it could be.

The Broader Implications of the Deal

Assura’s potential acquisition is part of a broader trend of private equity firms and other investors snapping up U.K.-listed companies, a phenomenon that has contributed to the shrinking size of the London stock market. These deals are often driven by the attractive valuations of U.K. companies relative to their U.S. counterparts, with London-listed stocks frequently trading at a discount when measured against expected earnings. As the situation unfolds, all eyes will remain on whether KKR and Stonepeak can finalize the deal, or if PHP will mount a competitive challenge, in what continues to be a closely watched corporate battle.