Expected higher offer — Upside TBD (at £0.495/share)
This idea was shared by Marko.
This is a play on either a bidding war or a higher offer, with protected downside. Two credible bidders are at the table, both having already made several offers to acquire the company. With the stock now trading at the latest offer price, investors are effectively getting free optionality on any further bidding.
Assura is a primary healthcare property investor with a market cap of 1.6bn GBP (avg. daily trading volume of 9m EUR) listed in the UK. They purchase or develop properties that are then leased to practices and primary care trusts. With almost all earnings paid out to shareholders it has mainly attracted dividend investors (current yield 6.8%).
The share price and NAV performed well until 2021 when interest rates were low and declining, pushing valuation of the properties higher. The rising interest rates thereafter have put pressure on the valuations of the owned properties and ultimately net asset value. NAV has declined from the peak of 61p to the current 50p. The share price decline and discount to NAV has attracted private equity and strategic investors’ interest.
Here’s the timeline of the recent events:
- February 17 – KKR submitted a non-binding proposal for Assura at 48p/share in cash. This followed three earlier rejected offers.
- March 4 – Primary Health Partners (PHP), a very close industry peer of similar size (£1.3bn market cap), made a non-binding proposal for an all-share merger. Assura rejected it as undervaluing but agreed to continue discussions and provided access to due diligence. This was not publicly disclosed at the time.
- March 10 – KKR, now joined by Stonepeak, raised its offer to 49.4p/share, also all-cash.
- March 10 – PHP publicly announced its bid (with no details on terms) and stated that it continued to review its position, citing strong strategic synergies with Assura.
- April 3 – PHP submitted a revised offer at 0.3848 PHP shares + 9.08p/share in cash, valuing Assura at 46.2p/share at the time (including the dividend paid on April 9).
- April 9 – Assura rejected PHP’s offer as insufficient and signed a takeover agreement with KKR and Stonepeak at 49.4p/share. Shareholder meeting was set for June 5. The transaction was expected to close “early in Q3”, i.e. in only 2-3 months.
- April 9 – PHP responded, saying it disagreed that the KKR offer was superior and would evaluate its next steps.
- May 16 – PHP returned with a new proposal at 0.3769 PHP shares + 12.5p/share in cash, worth 51.7p/share at the time (5% above KKR’s offer). At the current prices the offer values Assura at 50.45p/share, still above the competing bid. KKR issued a detailed critique on the revised PHP’s bid.
- May 23 – Assura, after consultation with its major shareholders, has adjourned the June 5th meeting and “engaged in further discussions with PHP and commenced due diligence in relation to PHP to determine whether to recommend the PHP Offer to Assura Shareholders.
Hence, KKR is now under pressure to increase the bid. The PHP offer has one weak spot as only 12.5p of the consideration is in cash and the remainder in PHP shares. Hence, they could still pick KKR as a less risky option. On the flipside, there should be decent operating synergies that enable PHP to pay more and offer Assura shareholders to profit from future value creation (via retained PHP shares).
After the firm offer from KKR in April, Glazer bought a 1.1% position in Assura. Since then, they have gradually increased the position to 2.9% (£50m position) as of May 29, buying mostly at 48-49p/share. The fact that they have kept increasing their position despite the spread narrowing significantly (and turning negative relative to the lower KKR offer) likely shows that they expect a bidding war—optionality with little to no downside, that’s the setup.
From a regulatory perspective there are limited risks. KKR as a financial buyer should not raise any antitrust concerns. PHP in turn runs the same business model but given the fact that the (healthcare) property market is huge, it is unlikely that two property companies below 2bn GBP in value will encounter any issues. Assura and PHP each manage about 600 properties, most of which are primary care facilities. In comparison, the number of medical centres alone in the UK is estimated to be around 8000.
Scenario analysis
I expect at least a counteroffer from KKR and potentially a bidding war between the two bidders. KKR is still on its initial offer and has not raised it even once.
The beauty is that the KKR offer, currently the lowest, does not yield any downside. Effectively one gets the money back and only incurs opportunity costs.
The PHP share price saw a slight decline recently and the share component reduced the offer got reduced from 51.7p to 49.8p, hence it is barely better than KKR’s bid. However, there is a call option on a recovery of the PHP share price and Assura can use the reduced share price to renegotiate the offer (more shares, larger cash component).
If the share price recovers to the initial value, there is a 5.0% return to be made.
I see a 40% chance that either KKR increases its offer, or this situation will result in a bidding war. In both cases I expect a target value between 53p and 55p. Even if no new bid emerges there is no downside, only opportunity costs. If Assura goes with KKR, we will get our money back, most likely in 2-3 months. The PHP offer is currently depressed by the PHP share price decline vs. its initial value but this raises the prospects of a higher bid.
I view the risk-reward very skewed to the upside. There is no downside even if there are no new bids. There are well-regarded shareholders involved which could even take an activist role if necessary. I would initiate a decently sized position in Assura at a price below the KKR offer level, i.e. below 49.4p.
AGR is expecting to ex dividend of 0.84p (~1.7%) on 06/05, and PHP ~1.78p (~1.8%) in early July.
So the KKR offer including the next dividend is not 49.4p but 50.24p.
From the April 9th announcement:
“Where any dividend, distribution or other return of capital is announced, authorised, declared, made or paid or becomes payable in respect of Assura Shares on or after the date of this Announcement (other
than the Permitted Dividend):
o if such dividend, distribution and/or other return of capital is paid or made prior to the Effective Date, then Bidco reserves its right to reduce the Cash Consideration by an amount up to the aggregate amount of such dividend, distribution and/or other return of capital;”
The divi you mentioned was declared on May 19th. Hence, I expect that KKR will deduct it from the consideration.
Marko (and others) – are you shorting any PHP at this point?
No, I do not want to short it at the current stage. In fact, I want (cheap) long exposure to PHP, because if PHP goes up the share consideration becomes more valuable (>75% of offer is share-based) and makes it more likely that AGR goes with PHP.
Furthermore, if PHP drops out of the bidding, PHP shares will likely go up (no share dilution). Hence, you will lose on the short leg while AGR will be flat.
What if one or both bidders (i.e., KKR and/or Primary Health Partners) withdraw their non-binding offer? This stock would most likely decline in that scenario….right?
Neither offer is binding. No cash has been exchanged. That is my understanding.
The PHP offer is non-binding, the KKR transaction is a “recommended cash acquisition”. Both parties reached an agreement and if all conditions are fulfilled the transaction will go ahead.
See here: https://www.londonstockexchange.com/news-article/market-news/recommended-cash-acquisition-of-assura-plc/16981819
Why is there no downside?
We have two highly motivated bidders. One offer (KKR) is firm, which means you cannot change your mind easily and walk away. The other offer is higher, but less firm, i.e. PHP can walk away as it is non-binding. But we just need one firm bid from a downside perspective.
At the same time the share price is still at the lower KKR bid (48.56p adjusted for the latest dividend) giving no credit for an improved offer. That’s why I view it as no downside.
An update from the company:
– discussions with PHP are ongoing, ‘The provision of due diligence materials continues and Assura is working closely with PHP to ensure that the process moves forward in a timely manner.’
– the KKR/Stonepeak bid was clear by regulators: China’s State Administration for Market Regulation, the Israeli Competition Authority, and the Korea Fair Trade Commission.
https://www.londonstockexchange.com/news-article/AGR/updates-relating-to-the-cash-offer-from-sana-bidco/17073109
https://www.assuraplc.com/~/media/Files/A/assura-plc/documents/rns/recommended-best-and-final-increased-cash-offer.pdf
KKR raises its bid for Assura to 50.42p.
I think the increase is a little disappointing. I will wait where the remaining spread settles. It is rather unlikely that PHP will be successful with another counter bid, I think.
The situation remains fluid – looks increasingly like a bidding war.
PHP this morning announced they continue to believe a combination with Assura is compelling.
https://ir.design-portfolio.co.uk/viewer/70/78099
They do not mind that AGR pays another 0.84p quarterly dividend (i.e. will not reduce their offer). They are also improving other terms like the minimum acceptance rate (50% like KKR offer). They address issues like leverage and execution.
Pressure remains on management to engage with PHP and on KKR to increase again. Shares are 1% below KKR offer and 3% below PHP. I will hold.
Adding the 0.84p AGR special dividend (brought forward from October) and substracting the 1.78p PHP July dividend, the PHP offer is currently 2.6% higher than KKR’s.
KKR probably can’t increase given the offer is already “best and final”?
I do not think this is binding. With “best and final” bidders want to signal that you better accept the offer because there will not be a better one. It is merely an indication that their willingness ends here.
But if someone overbids, like PHP in that case, they could increase again.
Unlike some strategic buyers that make a bid only every several years, KKR is in the business of making bids and makes numerous bids every year, and a reputation of “final is final” is very important to them.
I can’t recall a case where KKR said it was final and then returned with a higher offer soon after.
The FT runs a piece on the takeover after speaking with Assura investors:
https://www.ft.com/content/f2d58232-761e-43fb-80b9-76c2850d4404
The higher PHP bid is favored by investors representing 12% of Assura capital. Schroeder, Quilter, Allianz and Baillie Gifford are mentioned. Firstly, they want to remain invested in the sector, which is possible due to the share component. Secondly, the KKR bid is simply too low.
I don’t see why these shareholders need to worried about the offers if they just want to remain invested in AGR or the sector.
Both offers are takeover offers (KKR has switched away from Scheme of Arrangement) and buyers need >90% to squeeze out minority shareholders.
With combined 12% stake, they can always block a squeeze-out and remain invested in a publicly-listed AGR.
So I think they are just making noises and angling for a higher offer.
Agree, they could collectively not tender and keep the company listed. The potential problem they see is the share liquidity. That goes down materially if KKR owns the biggest chunk of AGR shares.
Marko, when would you expect another bid from PHP? The buyout by KKR is advancing.
https://www.londonstockexchange.com/news-article/market-news/offer-updates/17093508
Assura has committed to commenting on the PHP offer by Friday next week (27th). That was stated here:
https://www.londonstockexchange.com/news-article/AGR/statement-re-offer-by-php-posting-of-offer-doc/17086496
Shareholder approval is still outstanding, hence KKR cannot quickly close “on the cheap”. I think Assura is now engaging with both holders behind the scenes about who is willing to offer the most attractive bid. I expect another modest increase.
It is good news that regulatory approvals are piling in. It will speed things up if KKR turns out to be the winner of the bidding war.
This morning, PHP increased its bid for Assura again (4th time). They now offer 55p including dividends which is 5.8% higher than KKR.
The reason why Assura is only up marginally today, and the current offer only equates to 51.5p is that PHP shares are down 4% and 4/5 of the compensation are share-related.
The current spread is at 2.3% which is quite wide. I expect KKR to make an announcement soon. It is difficult to assess if they will top the PHP bid.
However, due to the attractive spread, a potential recovery in PHP share price and an KKR bid, I will hold.
Thanks Marko. I think if KKR pull out it might give a us another decent shot at goal given how these things tend to over react.
Also, on a side note, are you looking at Spectris plc (SXS) ? Could get spicy if KKR come over the top, which it seems to be pricing in.
I looked at Spectris, there is a chance of an emerging bidding war with KKR joining. Currently you pay a 1.1% premium over the Advent bid.
Two arguments against a counterbid are that KKR previous bids had been lower and that Advent’s premium looks quite high with 80%. To me that feels like a “knock out” bid discouraging other bidders.
I am watching.
Well done for everybody who took a position in SXS. KKR did came up with bid topping Advent.
As of July 4, 2025, PHP had received valid acceptances for its offer representing just 1.14% of Assura’s issued shares.
I think such a low acceptance rate is normal this early in the process. Holders have until mid-August to decide. It will now be interesting to see if the UK will probe the merger formally.
PHP has secured all reg approvals.
https://www.londonstockexchange.com/news-article/PHP/update-on-regulatory-condition/17131860
Yes, all regulatory approvals should be in, but my understanding is that the British CMA can still interfere if they think the deal falls into their responsibilities and they are concerned about competition.
Marko I know this idea is now a little settled, but I’m still long and will be tendering in my shares next month.
IG sent the tender offer – interestingly, for PHP, they have given not only the cash (12.5p) and shr combo, but they also have a enhanced equity offer (0.507 shrs PHP per AGR), and also a full cash offer (52.5p per share). Both have an extra dividend on top.
Assuming the cash option is elected, is still a 5.7% premium to todays close. They said they will pro-rata it if too much of one option is chosen, but I can imagine many fund managers would want the all shares option, to keep the risk.
Obviously there is optionality till the tender date – if PHP’s share zooms, then option2 is optimal.
What’s the “enhanced equity offer (0.507 shrs PHP per AGR)” about? I couldn’t find anything about this offer.
And I don’t see any possibility of “pro-rata”. Both the PHP and KKR offers are conditional on >50% acceptance, so it’s not possible for both offers to move forward.
Correct me if I’m wrong here but PHP’s formal offer is for a default mix of cash and new PHP shares. To provide flexibility, they have also included alternatives. The “enhanced equity offer” (e.g., 0.507 PHP shares) and the “full cash offer” (e.g., 52.5p) are elections within this single PHP offer. They allow a shareholder to choose to receive more stock or more cash than the standard mix, respectively. The pro-ration Akash3 mentioned applies internally to the Mix and Match facility.
As I understand it: In AGGREGATE, all Assura shareholders will receive compensation of 12.5p in cash and 0.3865 PHP shares. But INDIVIDUALLY, shareholders could also go for maximum cash 52.5p or maximum shares 0.507 PHP whatever they like. Not all can go for shares (or all go for cash), because in aggregate it has to be the 12.5p cash and 0.3865 new PHP shares.
In that way PHP knows exactly how many new shares and how much cash they need, but they do care if a few holders will end up with only cash or only shares.
Thanks for the update.
I was not aware of the different offers. I think you are right, this gives some degree of optionality. If PHP share price remains weak, one could opt for cash (higher spread). In case PHP recovers or even rallies (one could make case for that), it is better to go for maximum amount of shares.
Can the KKR offer still win? It seems that everyone is still waiting until the last minute before tendering (acceptance levels below 1% for both offers).
Even with very small fall in PHP stock price, the certainty of the KKR all cash offer can become very attractive.
With 37% fall in AGR price in the past 5 years, not many AGR shareholders are worried about taxation on realized capital gains (which is the main factor typically driving some shareholders to prefer share exchange offers).
I think investors in general wait for the last minute. Why tender if you can retain a “free option” to do sell or accept a higher offer? I can imagine KKR waiting for a PHP share price to fall to make their offer more attractive or even increase their bid (despite declaring it best & final).
If you look at the AGR shareholder structure, most investors are professional funds that do not worry about capital gains (or losses) as those are exempted at the fund level. Funds that want listed exposure to healthcare properties will struggle to find it once AGR is taken private for cash. They see value in remaining invested in the merged entity.
Spread to the PHP mixed offer (plus 0.84p special dividend) has widened to >2%, which is unusually large for a deal expected to close within one month .
The PHP offer is now worth the same as the KKR offer.
I agree. The spread is very wide and the offer is now on par with KKR. Yet investors prefer PHP like the Bloomberg article from below shows. I will go for maximum cash and if other shareholders prefer new shares I see a chance to get 52.5p in cash.
—–
(Bloomberg) — Assura’s third-largest shareholder “strongly” favors PHP’s takeover bid for the London-listed healthcare landlord ahead of an Aug. 12 deadline for investors to accept the offer, which is facing a rival bid by KKR.
PHP’s offer for Assura will “enable shareholders to remain invested and participate in future upside as a result of a re-rating from scale and synergy benefits, in addition to future growth in rents and values,” Sue Noffke, Schroders’ head of UK equities, said in an emailed statement
Schroders holds 5.1% of Assura, making it the company’s third-largest shareholder, according to data compiled by Bloomberg
PHP’s latest cash-and-stock offer was worth 53.3p per share, including a special dividend of 0.84p, when Assura’s board recommended it in June
PHP’s share price has fallen 7% since June 20, the date on which PHP’s offer is based
This means that the offer is now worth 50.56p, including the special dividend, just ahead of KKR’s final cash offer of 50.42p, according to Bloomberg calculations
Do you know how to indicate Mix and Match preferences at IBKR?
I do not hold any shares at IBKR. From my broker I received a notice with 3 choices.
1. 12.5p cash and 0.3865 new PHP shares
2. 0.507 new PHP shares
3. 52.5p in cash
One noteworthy piece of newsflow from today:
UK’s CMA issued an initial enforcement order which means PHP has to hold Assura separate, i.e. it cannot integrate the company until the investigation is finished and there are no concerns.
Hence, they can still close the transaction and pay us in cash and shares.
PHP’s bid has received acceptances from 63% of outstanding shares, surpassing the 50% threshold required to make the offer unconditional. A special dividend will be paid to all equity holders as of August 12.
Assura shares are currently trading in line with the cash+stock bid.
https://otp.tools.investis.com/clients/uk/assura3/rns/regulatory-story.aspx?cid=405&newsid=1976490&culture=en-GB&val=638907631965798206
Acceptance now in excess of 75%
https://www.londonstockexchange.com/news-article/PHP/update-on-acceptance-levels/17194265
PHP announced that the offer will close for acceptances at 1.00 p.m. on 10 September 2025.
https://www.londonstockexchange.com/news-article/PHP/offer-closure-and-compulsory-acquisition/17201399
PHP has reached >90% of Assura shares. They will delist the company and force remaining shareholders to accept the offer.
My shares have been accepted. I received 19p in cash (vs. the initial offer of 12.5p) and 0.3238 PHP shares per Assura. Including dividends and current PHP share price I have a miniscule gain.
I plan to hold the PHP shares and do more work on the company. It looks cheap to me and the share price could be depressed from arbs shorting PHP which could now unwind. But admittedly it is now less of a Special Sit.
The CMA finally greenlighted the Assura acquisition by PHP, seeing no significant impact on competition. PHP shares (received in exchange for Assura shares) are up 2% to 95.3p. Selling today means you still get a 1.775p dividend on Nov.21 (ex-dividend date was Oct. 9th).
I have exited by position this morning at an acceptable gain of 5.6% over a period of 5 months on my initial investment. Considering that I received the cash component and divis earlier, the IRR is actually higher.
Here is a quick calculation of the return:
Bought Assura at 49.4p (End of May) and received two quarterly dividends of 0.84p. The merger paid 0.1899p in cash and 0.3238 PHP shares for each Assura share. My break-even price for the new PHP shares comes down to 88.6p. I have now sold them at 95.3p plus 1.775p yet to be received.