KKR and Stonepeak intensify opposition to PHP’s Assura bid, warning of debt risk and CMA hurdles

Why Are KKR and Stonepeak Challenging PHP’s Offer for Assura?

The battle for control of Assura plc, one of the United Kingdom‘s largest healthcare property investors, escalated sharply as KKR and Stonepeak—through their acquisition vehicle Sana Bidco Limited—renewed their attack on the rival Primary Health Properties PLC (PHP) bid. The private equity consortium, which already has the backing of Assura’s board for its £1.5 billion all-cash offer, issued a detailed critique of PHP’s share-and-cash combination proposal, warning it poses material financial, regulatory, and execution risks for shareholders.

This latest development further intensifies one of the most watched UK healthcare REIT takeovers in recent memory. It highlights the diverging philosophies between public market consolidation strategies and long-horizon private capital deployment in the evolving UK healthcare infrastructure sector.

What Are the Core Concerns Raised by KKR and Stonepeak?

In a strongly worded statement, Bidco (backed by KKR and Stonepeak) outlined its belief that PHP’s proposal, announced on 16 May, would significantly erode shareholder value through excessive leverage, asset fire sales, and a risky debt-funded capital structure. It also flagged potential intervention by the UK’s Competition and Markets Authority (CMA) as a material obstacle to timely deal completion.

Key Financial Risks Outlined:

KKR and Stonepeak noted that PHP’s offer would increase the combined company’s loan-to-value (LTV) ratio to 55%, significantly higher than PHP’s own target of 40–50%, Assura’s target of below 45%, and the broader UK REIT sector average of approximately 30%.

The bid would compel PHP to dispose of valuable hospital assets—which Assura had acquired in competitive auctions—under less favourable conditions, likely at a discount to book value, thereby destroying shareholder equity.

Moreover, PHP’s offer would be financed using a new £1.225 billion unsecured bridge loan, expected to carry a higher interest rate than Assura’s current debt (weighted average cost of ~2.7%). Bidco warned that this refinancing structure could undermine synergy gains and elevate the combined group’s long-term cost of capital.

PHP’s plan draws on all currently available debt lines, which KKR and Stonepeak believe would leave the merged entity capital-constrained, unable to fund portfolio growth or make necessary capital expenditures to modernize aging general practitioner (GP) surgeries and NHS infrastructure.

Could Regulatory Challenges Derail the PHP–Assura Merger?

One of the most striking elements of Bidco’s critique is its concern over CMA scrutiny. As PHP and Assura are the two largest UK-based primary care property owners, their merger could invite antitrust investigations under the Enterprise Act 2002.

KKR and Stonepeak highlighted that PHP has not made CMA approval a condition of its offer. This decision, Bidco argued, effectively transfers execution risk to Assura’s shareholders, particularly if the CMA issues preemptive restrictions or a Phase 2 investigation delays the transaction.

In a scenario where regulatory action stalls the merger or enforces structural separation, PHP may be unable to deliver the anticipated benefits. Worse still, if the Bidco offer lapses due to timeline delays, Assura could be left without either transaction, negatively impacting its share price and investor sentiment.

What Are the Strategic Benefits of the KKR-Stonepeak Offer?

The all-cash offer from Bidco was first announced on 9 April 2025, with Assura’s board issuing a formal recommendation in favour. Unlike PHP’s share-heavy bid, the Bidco Cash Offer provides full liquidity at a fixed price, offering shareholders a clean exit amid market volatility and REIT sector underperformance.

Beyond the near-term certainty, KKR and Stonepeak have promised to inject new capital and accelerate Assura’s property development pipeline. The consortium views the UK’s primary healthcare infrastructure as undercapitalised, particularly outside of London, and plans to finance GP surgeries, NHS facilities, and independent health providers through long-term asset ownership models.

With deep experience in infrastructure and healthcare investments globally, both KKR and Stonepeak are positioning themselves as active partners to Assura’s management team in its next growth phase—rather than just financial sponsors.

What Is the Market Sentiment Toward Each Proposal?

As of mid-May 2025, investor sentiment remains split. On one hand, Bidco’s cash offer is seen as a low-risk option for immediate value realization—particularly appealing for institutions seeking liquidity amid the broader underperformance of UK-listed REITs. On the other, PHP’s share-based offer could appeal to shareholders betting on post-merger upside if synergies materialize and regulatory clearance proceeds smoothly.

Assura’s shares have been trading in the 48–51 pence range, close to the implied valuation of PHP’s offer (currently 51.7 pence, including dividends). However, this value is largely inflated by recent gains in PHP’s share price, which Bidco warned may revert following deal closure due to integration risk and debt load concerns.

At the time of Bidco’s possible offer announcement on 13 February 2025, Assura traded at a 24.2% discount to NAV, PHP at a 12.6% discount, and the overall UK REIT sector was at a 30.5% discount. These valuation differentials add complexity to investor modelling of post-merger outcomes.

How Have KKR and Stonepeak Framed PHP’s Offer in Context?

In their 17 May statement, KKR and Stonepeak painted PHP’s proposal as fundamentally constrained. By relying on debt-funded consolidation, they argued, PHP would need to focus on deleveraging through divestments rather than growth, potentially erasing EPS accretion and straining its investment-grade credit rating.

If the merged entity loses its investment grade, it could be forced to repay £900 million of Assura’s public bonds, which currently enjoy low interest rates. PHP’s success in refinancing near-term debt maturities and “terming out” its bridge facility is critical to retaining favourable funding conditions, Bidco said.

The consortium further highlighted that PHP has not issued primary equity for 3.5 years, suggesting limited market appetite for fresh capital. Without access to equity or unused debt facilities, KKR and Stonepeak argue that the combined business would struggle to finance property development or meet its NHS-facing infrastructure obligations.

What’s Next for Shareholders and the UK Healthcare Property Sector?

Assura shareholders now face a binary choice: accept Bidco’s cash offer, with full value realization and private capital backing, or vote for PHP’s strategic merger, which carries more execution and regulatory risks but could deliver long-term upside if successful.

Analysts expect both parties to intensify shareholder outreach in the coming weeks. While the Scheme Document for Bidco’s offer was published on 14 May 2025, PHP may need to revise or improve its proposal if it hopes to gain traction with institutional investors.

The outcome of this battle will likely have far-reaching consequences for the future of UK healthcare real estate. The winner—whether KKR and Stonepeak or PHP—will inherit a large and complex portfolio amid rising demand for modernized primary care facilities.

Expert View and Future Outlook

From a sector perspective, the Assura bidding war illustrates how private equity is increasingly targeting listed infrastructure REITs as public market valuations remain depressed. The healthcare REIT space, which blends inflation-linked returns with essential service exposure, remains attractive to long-duration capital.

KKR and Stonepeak’s move reflects broader global trends in infrastructure consolidation, particularly in health and logistics. Analysts expect similar PE-backed transactions to emerge across European and North American REITs in the next 12–24 months as sponsors seek to acquire discounted assets with operating upside.

As for Assura, a deal backed by KKR and Stonepeak would signal a shift toward flexible, off-market capital deployment, whereas PHP’s success would reinforce the case for public REIT mergers as a route to scale and operating efficiency.

Sentiment Summary & Institutional Flow Insight:

Investor flows in recent weeks show a moderate pickup in Assura volume, with institutions likely positioning for both outcomes. Passive holders such as index funds may lean toward PHP’s offer due to continued public listing, while long-only funds focused on NAV realization could back the Bidco proposal. No activist shareholder positions have been disclosed yet, but further announcements are expected before the final shareholder vote.