Care Reit gets shot in the arm as US rival makes £448m bid

US companies continue to target UK healthcare property trusts, as the board of Care Reit urged shareholders to accept a takeover bid by US rival.

Care Reit (CRT ), formerly known as Impact Healthcare, is set to be acquired by US-listed CareTrust Reit in a £448m deal.

The price tag represents a premium of 32.8% to CRT’s closing price of 81.3p on 10 March. News of the announcement caused the shares to surge 33% to 108.3p at midday on Tuesday.

Launched in 2017, CRT invests in long-leased care homes and currently yields a little under 9%. It is the second healthcare property trust to be taken private this week after Assura (AGR ) finally succumbed to a takeover by a private equity consortium.

Under the terms of the CRT deal, shareholders will receive 108p per share in cash. Deutsche Numis analyst Ewan Lovett-Turner said this represents a discount of around 6.8% to book value.

Nonetheless, the board is encouraging shareholders to vote in favour of the acquisition with a general meeting set to take place by May 2025.

Despite ‘significant financial and operational progress’ made since IPO, the board said CRT had suffered from a number of challenges in line with other trusts. These include a dislocation of share price from underlying financial fundamentals like net asset value (NAV) and a higher cost of capital due to interest rate rises.

The board does not believe that CRT’s discount reflects the current value of its property assets nor the longer-term prospects of the portfolio.

‘Many of the factors contributing to the discount are macroeconomic and non-CRT specific and, as such, CRT is unlikely to be able to overcome them in at least the short to medium term,’ the board explained.

It pointed to the fund’s persistent discount over the last two years, which it said ‘shows little sign of changing’ and would continue to constrain CRT’s access to capital.

Even though the bid still represents a discount, Lovett-Turner describes it as a ‘relatively attractive outcome for shareholders’, given the macroeconomic and sector-specific headwinds that are weighing on sentiment.

US-listed CareTrust has a market cap of $4.9bn (£3.8bn) with over 400 ‘net-leased’ properties. It said it has spent time evaluating its entry into the UK market, which it sees as attractive on account of its ‘underlying dynamics, driven by demographics’.

Over the past year, CRT’s shares are up 7.5%, which compares to a 14% gain by its main rival Target Healthcare Reit (THRL ).

Over three years, CRT is down 7.6% which compares to a 0.4% fall by Target Healthcare.