- Private equity bid raised by 2.9%
- Board inclined to recommend offer
- Rival all-share PHP deal rejected
It could be fifth time lucky for US buyout fund KKR (KKR:NYSE) after it raised its bid for UK primary healthcare facilities owner Assura (AGR) from 48p to 49.4p including the upcoming dividend.
The shares, which popped to 45p after it was revealed last month KKR had made four approaches to the FTSE 250 firm, but then drifted back to the 40p level, jumped 14% to 46.50p in anticipation a deal might finally be done.
BOARD ‘MINDED TO RECOMMEND’ DEAL
The board of Assura said it had received an indicative, non-binding proposal from a consortium of KKR and Stonepeak Partners of 49.4p for the business, a 2.9% increase on its last proposal, with investors receiving cash consideration of 48.56p per share and retaining the 0.84p per share dividend due on 9 April.
The offer values the business at £1.6 billion, or 100% of its EPRA NAV (net asset value) as of 30 September 2024, and represents a 31.9% premium to the undisturbed Assura share price on 13 February, the day before KKR made its initial proposal.
Having consulted with its major shareholders, the board said if a firm offer was made on the latest terms ‘it would be minded to recommend such an offer to shareholders’.
In an interesting wrinkle to the story, Assura revealed it had also received a proposal from Primary Health Properties (PHP) regarding an all-share combination with an implied value of 43p per share as of 13 February, which it had rejected in the light of the revised KKR offer.
WHAT DO ANALYSTS THINK?
Analysts at Van Lanschot Kempen said the upped bid by KKR ‘screens attractive and matches the last reported EPRA NTA/share. It is supportive to see the board is considering recommending it to its shareholders, if made firm and binding.’
The real estate team at Panmure Liberum commented: ‘We previously wrote that a 48p bid was inadequate, as it reflects the equity market losing £3bn of enterprise value to private equity at a sustainable cash earnings yield of 7.1%, more than 250 basis points above 10-year Gilts for one of the least risky income streams in the market, with indexed leases paid for if not directly backed by the UK government.
‘The updated bid of 49.4p (at NAV) is a modest increase at a 6.9% sustainable earnings yield (and) doesn’t materially change our view that these levels are still insufficient to compensate equity holders for giving up a company with these long-term growth prospects.’
Disclaimer: The author (Ian Conway) owns shares in Assura
