KKR lashes out against PHP in Assura bidding war

Private equity giant KKR has lashed out against rival PHP in its bidding war for GP landlord Assura, arguing that a takeover by its competitor would risk scrutiny from the regulator.

In a stock exchange notice this morning, KKR argued that its offer for Assura was “superior” as opposed to the PHP offer which comes with “numerous critical issues” that could “significantly increase the financial risk profile of the combined entity”.

The private equity firm argued that the offer from PHP would combine the two largest providers in the UK healthcare real estate sector, which could prompt a probe by the competition regulator.

“The PHP Offer seeks to combine the two largest providers in the UK healthcare real estate sector. This may attract scrutiny from the Competition and Markets Authority (CMA) which Bidco,” said New York-based KKR.

The firm argued that this could “give rise to a degree of timing and/or execution risk,” particularly given the CMA’s power to either issue an order preventing a transaction from closing, or prevent one company acquiring shares in another without its consent.

In contrast, KKR’s bid comes in full and in cash, and will not come with the high levels of leverage necessary for the PHP deal.

London-based PHP had previously argued that investors should ignore the rival bid from KKR despite it being higher given the synergies any combined entity would enjoy, but has since raised its bid above KKR’s price.

“Assura and its shareholders are in the nice situation of sitting back and awaiting the next move in a scrap which continues to drive up its take-out price,” noted AJ Bell investment director Russ Mould.

PHP and KKR’s offers

The PHP offer, made at the end of last week, comprises a mix of its own shares and cash, as well as a dividend due to be paid to Assura shareholders in July, totalling 50.8p per Assura share.

“Given the equivalent offer from KKR is 48.56p, the PHP bid appears superior in financial terms and gives investors continued exposure to the UK’s primary healthcare property market via a listed company,” said Oli Creasey, head of property research at Quilter Cheviot.

“However, the PHP bid is largely based on the company’s own share price, and so the value is liable to changes, both up and down, until any deal is closed.”

“Assura investors now have both options in front of them to choose from, and while there is no comment from the Assura board, who had previously recommended the lower KKR bid, the current value appears to be in the cash and share offer from PHP,” he added.