Just what the doctor ordered: a health check for the UK stock market starring a contested bid for Assura, the property outfit whose 603 buildings house GP surgeries and private hospitals.

No one really needs Rachel Reeves’s spending review to spot the favourable climate for this sort of business. The chancellor is promising £29 billion a year of extra NHS funding, including plans for “the training of thousands more GPs”. On top, there’ll be a shift of healthcare onto their doorstep: from “hospital to community”. And, even with that extra public money, there’ll still be heaps of demand for private hospitals: a waiting list of 7.4 million people will see to that.

In short, just the sort of backdrop for Assura to thrive — not least when real estate investment trusts (Reits) are getting a fillip, anyway, from lower interest rates. So, maybe it’s no big shock to find the company at the centre of a £1.7 billion bid battle between two different sorts of suitors: the private equity duo of KKR and Stonepeak offering a cash exit from the London exchange; and its listed rival Primary Health Properties dangling a cash-and-shares bid to create a bigger healthcare Reit, 48 per cent owned by Assura shareholders.

No, the surprise, at least on the face of it, is that the Assura board, chaired by Ed Smith, reckons it has no better option than to recommend the private equity bid. Worse, a low-ball one at that.

The pair’s “best and final” offer at 52.1p a share, including two already announced 0.84p quarterly dividends, is at a pitiful 3.4 per cent premium to Assura’s 50.4p a share net asset value. Or, to put it another way, the best the board thinks it can get for a business that’s spent 22 years building its portfolio is a teensy bit more than it paid for the properties.

In a sense, it gets worse, too. The board has an alternative option in PHP’s offer, coming largely in shares — 0.3769 new ones for each of Assura’s plus 12.5p cash and both dividends. And, after a 3 per cent rise in PHP shares to 103.2p, probably due to merger arbs, its bid is now marginally higher: almost 53.1p per share. So, why not take that, share in £9 million of mooted synergies, and be part of a bigger Reit capitalising on an ageing population, the extra NHS spending from Reeves’s review and a rising, index-linked rent roll for GP practices that’s underwritten by the taxpayer?

• Assura recommends KKR’s raised £1.7bn offer

The short answer is the London market. You can disagree with the decision of the Assura board, and some investors do, but it’s not irrational. The UK market has long undervalued both these businesses. Until KKR showed up, Assura traded at a hefty discount to NAV: the reason the private equity offer is still at a 39.2 per cent share price premium. PHP was also trading at a discount, meaning neither could raise equity for investment. Will putting them together make any difference?

Possibly not. Both companies have a fair bit of net debt: Assura, £1.49 billion; PHP, £1.32 billion. A merged group would have a loan to value ratio above 50 per cent. Getting leverage down depends on selling Assura’s private hospitals. And who knows what price they will fetch, not least with a Malaysian fund trying to offload a portfolio operated by Spire Healthcare, valued at £1.4 billion. You can see why the Assura board sees “material risks” in merging with PHP.

Crucially, the private equity duo have also switched their bid from a scheme of arrangement, requiring 75 per cent investor backing, to an offer needing only majority support. So, it will need a big investor rebellion to block it, while PHP looks maxed out. Assura shares rose 2.1 per cent to 50p, not signalling a higher bid.

There’s a danger, too, in conflating the UK stock exchange’s interest with the national interest. It’s hard to argue that KKR, home to an $83 billion infrastructure fund, isn’t better placed to invest. Even so, this bid risks turning into a right downer for the London market. If investors won’t back businesses with such obvious growth prospects, it must be pretty sick.

Home truths

Listen to the chancellor and she’s just delivered “the biggest boost to investment in social and affordable housing in a generation”. And Greg Fitzgerald, the Vistry boss, called it “a game-changing announcement”, while shares in the developer that’s hitched its strategy to working with housing associations building cheaper homes, rose 6 per cent to 693p.

Yet, is Rachel Reeves’s “£39 billion” over ten years all it was cracked up to be? Present spending in the affordable sector is around £3 billion a year. Adjust for inflation and you’d get a good way to her big figure anyway. And it’s backend loaded. It picks up to £4 billion in 2029-30, implying there won’t be much of a rise until then.

As Daniel Austin, the boss of independent property lender ASK Partners pointed out, too: “Investment must now be matched by urgent planning reform, proper resourcing of local authorities, and meaningful support for SME housebuilders.” Simply dangling a big figure won’t raise the roof.

Flying a kite

Not “an honest conversation”, surely? What from Heathrow, an airport that low-balled its traffic forecasts during Covid to try and hoodwink the regulator into doubling landing charges? True, that was under the previous boss, not the sparko Thomas Woldbye. Yet, if the “space constrained” airport breaking monthly traffic records really does want a frank chat over its third runway plans, there are obvious places to start.

What about the cost of it? Airlines reckon it’ll be £40 billion to £60 billion, potentially raising ticket prices by £100 a pop. Or how about explaining how a business with almost £17 billion net debt can even afford it. Or the likely disruption from diverting all 12 lanes of the M25. Plenty to be honest about here.