Not for sale! Assura board say KKR bid undervalues company and its prospects

Assura CEO Jonathan Murphy

The board of Assura board say KKR’s bid undervalues the company and its prospects and therefore rejected it unanimously. No further proposal from KKR has been received.

Yesterday KKR said it has submitted four indicative non-binding proposals to the Assura board at 48p per share. 

The Board remains confident in the long-term prospects of the Company and believes that Assura is strongly positioned to create value for shareholders.

Under the takeover code KKR now have until 14 March 2025 to either announce a firm intention to make an offer for Assura or announce that it won’t make another bid.

The flurry of activity on the market yesterday saw Assura’s share price surge from 38p to 46p initially, but at close of play had settled at 42p.

It also prompted commentators to analyse the cool market sentiment towards UK property.

“Investors do not seem to be particularly interested in UK real estate plays, judging by the poor performance of the FTSE 350 Real Estate Investment Trusts (REITs) sector and the wide discounts at which many property plays trade relative to their asset value, but private equity and trade buyers continue to snap them up,” said AJ Bell investment director Russ Mould.

“Healthcare building specialist Assura is the latest to draw a predator as American private equity investor KKR offers 48p a share in cash, a 28% premium to the share price last Thursday, the day before the would-be American buyer’s interest first became public.

“It will be interesting to see if KKR’s move, assuming it succeeds, flushes out any more interest from would-be buyers of UK real estate assets, be they private equity or industry players, or institutional or retail investors.

“The combination of interest rates that may stay higher for longer than thought, the relentless onslaught faced by brick-and-mortar retailers from online rivals, and hybrid working means that the FTSE 350 REITS sector continues to lag, as the wider UK stock market moves higher. The industry benchmark is the fifth-worst performer within the 39 sectors that make up the FTSE 350 over the past 12 months, with a 7.4% drop, compared to a 14.7% advance in the FTSE 350 itself.

“However, underperformance can signify an asset class is unloved and unloved can mean it is undervalued, and a series of bids for UK real estate plays suggest that someone, somewhere thinks there is an opportunity to be had.

“The bids of the last three years, which have come in the form of all cash, all stock or a mixture of the two, have come at an average discount to historic net asset value per share of just under 8%.

“That compares to the average discount of nearly 28% that prevails across 25 leading REITs and Real Estate Investment and Services companies that are listed in London, many of which come with a juicy dividend yield thanks to the rental income they generate (and the requirement to pay out at least 90% of profits to maintain REIT status).

“It is therefore easy to see why REITs might attract the attention of private equity buyers, given the combination of cash flow from rents, asset backing and lowly valuations. It now remains to be seen whether investors take the hint and show any further interest, although it may take further clarity on the trajectory of both the UK economy and interest rates for them to do so.”

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