PHP Takes Over Assura, Beating KKR in UK REIT Battle

Primary Health Properties pulled off a rare upset in the world of U.K. M&A, fending off a private equity heavyweight takeover of rival Assura.

The London-listed real estate investment trust secured 62.93 percent of shareholder support for its cash-and-stock bid by Tuesday’s deadline, edging out a competing offer from KKR and Stonepeak Partners that drew just 16.56 percent, according to Bloomberg.

The deal combines PHP’s $3.8 billion portfolio with Assura’s $4.2 billion in assets, creating the U.K.’s eighth most valuable REIT by market cap and the country’s largest publicly traded health care landlord

The vote marks a decisive win for PHP in a market where public landlords have been trading at steep discounts for years, squeezed by Brexit, the pandemic and rising interest rates. Those discounts have made them prime targets for private equity, which has been snapping up assets at premiums to beaten-down share prices.

This time, Assura shareholders opted to stay public, signaling confidence in a recovery as interest rates ease and supply constraints push rents higher.

The battle capped a 10-month pursuit by KKR, which first approached Assura last year alongside the Universities Superannuation Scheme before teaming up with Stonepeak. The consortium won Assura board backing in April, but PHP muscled in with a sweetened offer in June that valued Assura at $2.4 billion.

PHP’s victory came despite scrutiny from the U.K.’s competition regulator and a requirement to sell down a private hospital stake to cut leverage.

The result may prove to be a watershed moment for the primary care property market.

“There are not many examples in M&A history where the underdog has come out on top when taking on the corporate might of the likes of KKR,” Shore Capital analyst Andrew Saunders said.

It’s also a strategic about-face for a sector where recent high-profile deals — including Blackstone’s privatization of two UK logistics landlords — have underscored the appeal of cash exits.

There has been a wave of U.K. REIT takeover tussles. Blackstone is in line to buy Warehouse REIT, outbidding Tritax Big Box REIT, while Unite Group has launched a play for Empiric Student Property.

— Holden Walter-Warner