Ventas Inc., Chicago is buying a competing health care real estate investment trust, Nationwide Health Properties Inc., in an all-stock deal valued at $7.4 billion.
The exchange ratio of 0.7866 shares of Ventas stock for each share of NHP gives the deal a 15% premium to NHP shareholders based on the Feb. 25 closing price.
The parties claim the deal will create the nation's largest health care REIT, with pro forma equity value of $17 billion, pro forma enterprise value of $23 billion and over 100 customer relationships.
Senior housing will account for 55% of the combination's net operating income and high growth senior housing assets will account for 26% of NOI.
No single tenant or operator will account for more than 19% of NOI and the top three tenants and/or operators together represent 46%.
Ventas said the deal will result in reduced leverage, with a debt to enterprise value ratio below 30% and net debt to EBITDA ratio approximating 5 times at closing. The stronger balance sheet, larger portfolio and increased earnings diversification are expected to improve the combined company’s long-term cost of capital and credit profile.
Debra A. Cafaro, the chairwoman and chief executive of Ventas, will have the same jobs with the combination. Douglas M. Pasquale, NHP chairman, president and CEO, will take on a senior advisor role. Centerview Partners LLC is acting as financial advisor to Ventas, and Wachtell, Lipton, Rosen & Katz is acting as legal counsel. J.P. Morgan Securities LLC is acting as financial advisor to NHP, and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel.
