Healthcare real estate investment trust Ventas Inc. (VTR) has agreed to acquire smaller peer American Realty Capital Healthcare Trust, Inc. (HCT) for $2.6 billion in cash and stock, the two companies said Monday.
Ventas noted that the acquisition of American Realty Capital will add a total of 143 properties, along with a pipeline of more than $250 million in potential investments. The deal will enable the company to boosts its presence in senior living properties and medical office buildings or MOBs.
Under the terms of the deal, Chicago, Illinois-based Ventas will acquire all of the outstanding shares of ARC Healthcare for $11.33 per share. The offer price represents a 13.9 percent premium of to ARC Healthcare's closing stock price of $9.95 on Friday, May 30, of $9.95. The boards of directors of both companies have unanimously approved the transaction.
New York-based ARC Healthcare primarily invests in MOBs and health care-related facilities, including hospitals, rehabilitation and surgical centers, assisted-living properties and skilled-nursing facilities.
Under the deal, ARC Healthcare shares will be converted into a fixed number of Ventas shares, based upon a negotiated Ventas stock price of $67.13. ARC Healthcare shareholders can elect to receive either 0.1688 Ventas common shares or $11.33 in cash for each share of ARC Healthcare common share held by them.
The cash portion of the consideration is subject to a cap of 10 percent of ARC Healthcare's outstanding common stock. Assuming a 10 percent cash election, the stock component of the consideration will consist of Ventas issuing to ARC Healthcare shareholders about 26.9 million shares of Ventas common stock, currently valued at $1.8 billion.
Upon closing of the transaction, ARC Healthcare shareholders are expected to own about 8 percent of Ventas' 321 million shares of common stock then outstanding. The transaction is expected to close in the fourth quarter of 2014, subject to the approval of ARC Healthcare shareholders and other customary closing conditions.
Ventas also said it will acquire 29 independent living seniors housing communities located in Canada from Holiday Retirement in a separate transaction for C$980 million, or about $900 million, in cash. That transaction is expected to close in the third quarter of 2014.
The Holiday portfolio is currently 90 percent occupied, with margins of about 50 percent in markets with above average income and senior population growth rates.
Debra Cafaro, Ventas Chairman and Chief Executive Officer said. "With the addition of ARC Healthcare and the Canadian seniors housing communities, we are continuing our focus on private pay assets, expanding our industry-leading MOB footprint and international presence, and increasing our diversification while maintaining a strong credit profile and balance sheet. With these two accretive transactions, Ventas continues our excellent track record of value creating acquisitions."
Ventas said that although it expects the transactions to be accretive to its 2014 normalized FFO per share, it plans to update guidance for 2014 near completion of both transactions, the completion of ARC Healthcare's pipeline, and on determination of the final capital structure.
For 2015, Ventas expects the transactions to be immediately accretive to its normalized funds from operations by at least $0.10 per share and have an unlevered yield of about 6 percent.
VTR closed Friday's trading at $66.80, up $0.36 or 0.54 percent on a volume of 2.23 million shares.
HCT closed Friday's trading at $9.95. In Monday's pre-market, the stock is up $1.10 or 11.06 percent to $11.05.
For comments and feedback contact: editorial@rttnews.com
Business News