The American private equity group KKR has moved ahead again in the race to own hundreds of doctors\u2019 surgeries after increasing its offer for Assura, the NHS landlord, to \u00a31.7 billion.<\/p>\n
KKR, which has teamed up with Stonepeak Partners, has thrown in an extra \u00a3100 million after Primary Health Properties, one of Assura\u2019s peers, tabled a more lucrative merger proposal.<\/p>\n
Its \u201cbest and final offer\u201d works out at 52.1p for each Assura share, a few pence more than its previous bid, and Assura\u2019s board is recommending that shareholders accept it. A number of the directors are expected to stay with the business if KKR succeeds.<\/p>\n
Ed Smith, Assura\u2019s chairman, said he and the board had undertaken a \u201ccareful and thorough evaluation of both offers\u201d. <\/p>\n
He added: \u201cKKR 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.\u201d<\/p>\n
PHP\u2019s bid<\/a> equates to about 52.6p per share, although only \u00a3410 million of that is in cash. The rest is in PHP shares, which would give Assura shareholders 48 per cent of the enlarged group should they merge. <\/p>\n Both offers are marginally above Assura\u2019s last reported net asset value of 50.4p per share, the most recent estimation of what its portfolio was worth.<\/p>\n Given the certainty of KKR and Stonepeak\u2019s all-cash offer, Assura\u2019s board believes it offers \u201cmaterially less risk\u201d than PHP\u2019s, despite the latter valuing Assura more highly. PHP is not giving up and has said it \u201cstrongly disagrees\u201d with Assura\u2019s assessment of its proposal and is \u201cconsidering its options\u201d.<\/p>\n Assura shares were up a penny, or 2.1 per cent, to 50p by the close on Wednesday. PHP shares rose 3\u00bcp, or 3.2 per cent, to 103\u00bcp.<\/p>\n Assura, based in Altrincham, Greater Manchester, was set up in 2003 and now owns more than 600 healthcare buildings worth \u00a33.2 billion. Primary Health Properties owns 516 surgeries, dental practices and medical centres from Ramsgate up to the Scottish Highlands and across to Cork. <\/p>\n Between them they generated rental income of \u00a3333 million last year, close to 85 per cent of which is ultimately underpinned by the UK and Irish governments.<\/p>\n Despite winning over the board, a number of analysts and shareholders are yet to be convinced<\/a> by KKR and Stonepeak\u2019s proposal. They argue that property valuations, having fallen sharply over the past couple of years, are starting to rise again, while the consensus in the industry is that healthcare rents will pick up meaningfully over the coming years, given the growing need for healthcare facilities with an ageing population.<\/p>\n They also believe that private equity should be paying a greater premium to acquire a property portfolio that Assura has spent two decades building and which cannot be easily \u2014 or cost efficiently \u2014 replicated.<\/p>\n