Test of patients
KKR's bid to acquire the NHS landlord Assura for £1.7bn looks like it will finally get the go ahead despite opposition from major shareholders.
So what? Another day, another British company getting plucked off the London Stock Exchange by private equity (PE). The battle for Assura, which owns hundreds of GP surgeries, follows the takeover of cybersecurity group Darktrace by US-based Thoma Bravo in 2024 and the delisting of Hargreaves Lansdown by a consortium of PE groups in March. Both deals fuelled concerns that companies on the LSE are being chronically undervalued.
Surgery needed? Real estate, including the NHS, is attracting particular interest. "US private equity is making a move on UK property assets," says Oliver Creasy, analyst at Quilter Cheviot, one of the shareholders opposing KKR's bid. "They clearly see some value there. I would not be surprised if that interest continues until share prices re-rate generally."
- In March, Care Real Estate Investment Trust (Care REIT) was acquired by a US-listed provider for £448 million; while
- Warehouse REIT has agreed to a $635 million bid from Blackstone.
Research shared by the LaingBuisson consultancy shows that PE firms and operators have struck more than 130 deals for UK healthcare companies since 2021, with deal flows rising by more than 32 per cent last year. These figures don't include deals for social care services for children and adults – a traditional hotbed of PE activity.
Changing the balance sheets. Accusations that PE is profiteering off society's most vulnerable have hastened firms' forays into "safer" assets where they own the building but are not responsible for the service.
"The GP surgery market is very interesting from an investor perspective, because the income on it is highly secure," Creasy says. "It looks very much like a government bond, almost indistinguishable from a practical point of view, and there's only a handful of ways you can get that."
Self-Assura. Hence the bidding war for Assura. The company's share price is up 33 per cent since February, steadily climbing as each side refreshed their offers.
- Initially KKR made an all-cash offer of £1.56 billion, rising to a "best and final" offer of £1.7 billion.
- But some of Assura's biggest shareholders have said they prefer an alternative offer from its UK-listed rival Primary Health Properties.
- Investors including Quilter Cheviot, Schroders, Allianz, Gravis, Baillie Gifford and Columbia Threadneedle said they preferred PHP's cash-and-shares bid because of the perceived long-term return.
It's understood the Assura board held a meeting on Wednesday to discuss proposals, but it's not yet clear whether a decision has been reached. Assura refused to comment.
More private. Unlike the Assura bid, the majority of PE deals for UK healthcare companies in 2024 were for independent providers with scalable, commercial business models. This is part of a wider boom in private healthcare. According to data from Broadstone and the Private Healthcare Information Network
- a record 664,000 insured admissions were made in 2024, up 6 per cent on the previous year and 15 per cent on pre-pandemic levels;
- 14 per cent of the UK adult population have private medical insurance – equivalent to 7.6 million people; and
- between 75 and 80 percent of PMI coverage was provided by employers.
What's more… There have been few evaluations of the impacts PE ownership might have on UK healthcare providers. But a systematic review of mostly American studies in the BMJ associated it with a worse quality of care and higher costs.
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