Hunt Valley-based Omega Healthcare Investors Inc. will acquire a Chicago real estate investment trust in a deal that creates a $10 billion company focused on investing in skilled nursing facilities.
Omega (NYSE: OHI) plans to buy Aviv REIT Inc. (NYSE: AVIV) in a stock-for-stock deal valuing Aviv at $3 billion. Both companies' boards have approved the acquisition, which they expect to close in first quarter 2015 if shareholders vote in its favor.
The deal will form a real estate investment trust, or a company owning and investing in real estate, with a stake in nearly 900 health care facilities that have more than 90,000 beds in 41 states. Company leaders think it will give Omega the size needed to find cheap capital and connect with small operators in a fragmented but increasingly consolidating health care industry.
"It puts us in a position that no one can parallel," said Taylor Pickett, Omega CEO, during a conference call with investors. "We're going to see everything that comes out of these markets. We think we've gotten bigger and put ourselves in a position to grow faster."
Pickett will remain CEO after the acquisition is complete and Omega plans to keep its headquarters in Hunt Valley. Omega COO Dan Booth and CFO Bob Stephenson will keep their current roles as well.
Some of Aviv's operations will remain in Chicago, including its acquisition and development operations. Holdovers from the Chicago company will also have seats on Omega's board of directors. The company plans to expand its board to 11 directors, including Aviv's current CEO, Craig Bernfield.
The deal calls for Aviv shareholders to receive 0.9 Omega shares for each share of Aviv common stock. That works out to $34.97 of Omega stock per share, a premium of 16.2 percent based on the stocks' closing prices on Oct. 30. Estimates show current Omega shareholders will own 70 percent of the company after it closes.
The companies expect $9 million in cash savings from general and administrative costs, as well as additional savings from lower borrowing costs.
Omega invests in and finances the long-term care industry. It owns or holds mortgages on 562 skilled-nursing facilities, assisted-living facilities and specialty hospitals in 37 states. Those facilities have a total of about 63,500 licensed beds and are operated by 50 third-party health care operating companies.
Aviv owns post-acute and long-term care facilities and other health care properties. It owns 312 properties with 26,520 beds. They are leased to 38 operators in 29 states. The company held its initial public offering in 2013.