Two leading healthcare REITs, Ventas, Inc. and American Realty Capital Healthcare Trust (ARC Healthcare), announced today that Ventas will buy all outstanding shares of ARC Healthcare for $2.6 billion, or $11.33 per share, in cash and stock. Launched in 2011 as a non-traded REIT, ARC Healthcare listed on the NASDAQ on April 7, 2014. Both Ventas and ARC Healthcare invest in senior housing and medical real estate.
ARC Healthcare shareholders can decide to receive either 0.1688 Ventas common shares, which is based on a negotiated Ventas stock price of $67.13, or $11.33 in cash for each share of ARC Healthcare common stock they own. The per share values represent a 14% premium over ARC Healthcare’s May 30, 2014 closing stock price.
The cash component of the consideration will be capped at 10% while the stock component of the consideration will consist of Ventas issuing approximately 26.9 million shares of Ventas common stock, currently valued at $1.8 billion, to ARC Healthcare shareholders. The transaction is expected to close in the fourth quarter of 2014 and upon closing, ARC Healthcare shareholders will own about 8% of the 321 million shares of Ventas common stock then outstanding.
“We are very excited to announce this transaction which delivers our shareholders a compelling premium to the Company’s listing, tender offer and five day volume weighted average price (“VWAP”) prior to today’s announcement. In addition, it provides them the opportunity to participate in the future growth of what will become the largest, and in my view, best managed healthcare REIT and 6th largest overall REIT in the country,” commented Nicholas S. Schorsch, Executive Chairman of ARC Healthcare.
He continued, “Ventas is an ideal strategic partner given its complementary and broadly diversified real estate portfolio, outstanding history of value creation, and extraordinary record of dividend growth. In keeping with our commitment and past practice of aligning management and shareholder interests, the ARC Healthcare management team has elected to take all consideration for this transaction in stock of the combined company.”
In addition, Ventas announced that it will acquire 29 independent living seniors housing communities in a separate transaction. The communities, acquired from Holiday Retirement, are located in Canada and will be purchased in cash for approximately $900 million USD. The portfolio is currently 90% occupied and in markets that have senior growth rates and above average income levels.
Together, the ARC Healthcare transaction and the Canadian senior housing transaction are expected to be immediately accretive to Ventas’s 2015 normalized FFO by about $0.10 per share. They also have an expected unlevered yield of approximately 6%.
Chairman and Chief Executive Officer of Ventas, Debra A. Cafaro, stated, “These acquisitions are consistent with our stated strategy to be the leading owner of healthcare and senior living properties globally, and position Ventas to continue to deliver growth and consistent superior returns to our shareholders.” She added, “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.”