3 April 2025
If you are covering reports of a PHP indicative offer for Assura, please see the following comment from Oli Creasey, head of property research at Quilter Cheviot:
This morning Primary Health Properties (PHP) has announced that it has made an indicative offer for Assura, which is a combination of cash and PHP shares that value the company at 46.2p per share. While the offer is at a meaningful premium to Assura’s undisturbed share price it is notable that the proposal comes in below the 49p all-cash indicative offer from KKR. Assura’s management have not yet responded to the latest offer from PHP, but we note that the board rejected a previous offer from KKR at 48p, while they have indicated that they would be minded to recommend the 49p should it be made formally by KKR, and it seems unlikely that they would be able to recommend an offer that equates to 46p now.
However, the situation is more complicated than it first appears. A number of Assura shareholders have expressed frustration at the board’s willingness to engage with the all-cash private equity bid, as it would result in another UK REIT disappearing from the stock exchange permanently. Assura’s portfolio took many years to build out, and it is unlikely to be replicated any time soon. Those shareholders were attracted to Assura by the relatively high cash generation of the company, while being underpinned by an ultra-high tenant covenant strength – realistically only PHP can claim to match these qualities at it operates in the same sub-sector.
The bid by PHP looks like a calculated risk. The pricing is not competitive with the KKR bid at face value, but the company may be hopeful that enough shareholders are open to accepting a slightly lower price in exchange for the share capital remaining in a listed vehicle. Neither bid is formally on the table as of today, but were they to both materialise shareholders would have a difficult decision. To accept the KKR bid would mean having to find a new home for the money, and with PHP and Assura shares both still offering a dividend yield in excess of 7%, some may argue that the long-term prospects are greater than the cash in hand. While some investors may be tempted to take the cash and reinvest in PHP, the company simply isn’t large enough for everyone to follow suit.
