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A KKR-led takeover bid for NHS landlord Assura has been hit by opposition from some of the FTSE 250 group’s biggest shareholders, which favour an alternative offer from its UK-listed rival Primary Health Properties.
The bidding war over Assura has been running since February, with a consortium formed of KKR and US infrastructure investor Stonepeak last week making a “best and final” cash offer of £1.7bn.
But two of Assura’s top 10 shareholders — wealth manager Quilter Cheviot and investment firm Schroders — told the Financial Times they would favour PHP’s rival offer, which would keep Assura’s property assets on the London stock exchange.
Allianz Global Investors, Gravis, Baillie Gifford and Columbia Threadneedle were among the other shareholders to say they preferred PHP’s cash and shares bid of 53p per share over the consortium’s 52.1p all-cash offer.
Some of the shareholders throwing their weight behind PHP’s offer said they were concerned that the private equity bid would lead to the company being taken off London’s stock exchange at a low price.
A series of UK-listed companies including food delivery group Deliveroo and cyber security group Darktrace have been taken over by foreign buyers, fuelling concerns that groups on the London stock exchange are undervalued.
Marcus Phayre-Mudge, manager of Columbia’s TR Property Investment Trust, who backed the PHP offer, said: “The KKR bid simply doesn’t offer a premium significant enough to justify walking away from this long-term opportunity.”
Oliver Creasey, head of property research at Quilter Cheviot, said an acquisition by PHP would be attractive because it would allow the wealth manager to retain its investment in a listed company. Many investment funds are structured so that they can only back public companies.
“If the two bids were completely identical in monetary value, then the PHP bid would allow us to keep our exposure to the property via the listed sector. That has a value to us that cash [from private equity] wouldn’t match.”
On Friday, PHP moved to sweeten its bid by proposing to keep its offer at the current level even if Assura pays out a special dividend before the deal goes through. Assura’s board, which had recommended KKR’s offer, said on Monday that it was reviewing PHP’s revised terms.
The private capital consortium has amassed a 4.9 per cent stake, according to a disclosure on Monday, and will require the backing of at least 50 per cent of shareholders to succeed.
Caspar Rock, chief investment officer at Cazenove Capital, part of Schroders, said: “We believe the KKR offer doesn’t fully recognise the value of the Assura business to us as shareholders.”
A PHP takeover would be “an opportunity to consolidate and give a larger, lower cost, more liquid exposure to an attractive sub sector of the property market”, he added.
Together the groups that told the FT they were backing PHP hold at least 12 per cent of the shares in Assura, whose portfolio includes more than 600 doctors’ surgeries, treatment centres and other medical facilities.
Jon Stewart, investment manager at Baillie Gifford, said: “We favour the alternative proposal to combine [Assura] with its publicly listed peer, PHP.”
“We believe that KKR’s offer, a mere 0.04 per cent premium to the most recent valuation of the company’s net tangible assets, undervalues Assura’s long-term growth potential. After a number of challenging years adapting to higher interest rates, accepting the KKR deal would lock in valuations at a low point in the cycle and forfeit recovery opportunities.”
He added that a takeover by PHP would be “superior, allowing our investors to remain invested for the long term in a highly attractive, cash flow generative and growing asset”.
Simon Gergel, chief investment officer of UK Equities at AllianzGI, said he would like to remain invested in healthcare property and that the group’s “current intention is to reject the KKR bid and to accept the mostly equity counter offer” from PHP.
