KKR Challenges PHP for Assura Amid Intensifying Bidding War

The competition for the acquisition of Assura has escalated, with private equity firm KKR urging the company to reject a takeover bid from retail investor Primary Health Properties (PHP). This development follows KKR’s announcement that its investment vehicle, Bidco, has entered discussions with Assura’s board to promote its own acquisition offer.

Bidco has publicly criticized PHP’s assertion that recent declines in its share price were merely the result of temporary market activity, particularly merger arbitrage. This practice involves investors shorting PHP shares while simultaneously acquiring Assura shares, creating a complex financial landscape. KKR contends that many investors engaging in this strategy are not adequately protected against risk and may sell off their PHP shares, further impacting the company’s market position.

As the bidding war intensifies, PHP is facing pressure to secure shareholder support. The company issued a statement indicating that only a minority of shareholders had accepted its offer thus far. PHP emphasized the importance of the approaching deadline of August 12, 2023, which aligns with UK takeover regulations. These rules state that an offer becomes unconditional once a sufficient number of acceptances is reached, typically after a ‘minimum offer period’ concluding around Day 55 of the proposal.

Regulatory Scrutiny and Competitive Offers

In the backdrop of these developments, the Competition and Markets Authority (CMA) is investigating the proposed merger between Assura and PHP. Given that both companies are major players in the UK’s primary care and community health sectors, the CMA is assessing whether the merger could lead to excessive market dominance and reduce competition. Bidco asserts that its acquisition proposal will not attract the same level of scrutiny from the CMA.

Bidco’s current offer stands at 50.42p per share, which it claims is more favorable than PHP’s recent valuation following a downturn in share prices. In response, PHP has countered with an enhanced bid of 51.7p per share, alongside a commitment to adjust Assura’s acceptance threshold and expedite its quarterly dividend to October. In June, Assura’s board had recommended acceptance of PHP’s revised cash proposal, valuing the company at approximately £1.79 billion.

Analysts remain cautious about the outcome of this high-stakes bidding war. Oli Creasey, head of property research at Quilter Cheviot, indicated that while the situation is nearing resolution, uncertainties persist. He noted that KKR may not increase its offer further, but an unexpected downturn in PHP’s shares could bring about significant changes. “Given events to date, further twists and turns could be on the cards,” Creasey stated.

The battle for Assura is emblematic of the broader trends in the healthcare investment sector, where private equity firms and retail investors are vying for control of valuable healthcare assets. As the deadline approaches, stakeholders are closely monitoring the unfolding situation, which could reshape the landscape of primary healthcare in the UK.