Boosted by strong demand for senior housing services and low interest rates, merger and acquisition activity in the sector is on a record setting pace this year. And now, one can add the recently announced mega-merger between Omega Healthcare Investors and Aviv REIT to that tally. While the improving economy and the nation’s changing demographics continue to boost demand for senior housing services, industry participants and investors who are seeking capital to take advantage of this situation by purchasing additional properties or entering into joint ventures should contact Cambridge Realty Capital to learn more about the different financing options that it offers for these and other purposes as well.
Details of the Merger
The merger of Omega Healthcare Investors and Aviv REIT will take place as a stock for stock transaction, and the newly combined company will be valued at $10 billion. The CEO of the new company will be Omega Healthcare’s current CEO, Taylor Pickett. Craig Bernfield, Aviv REIT’s current chairman and CEO, will join the board of the directors of the new company. The new company will own 870 properties in 41 states, 789 of which will serve as senior living properties, more than twice as many as its largest public competitor, Ventas. The new company will also have $7.2 billion of equity market capital and will command total market capital of roughly $10.3 billion. $3 billion is attributable to Aviv REIT and the remaining $7.3 billion will be attributable to Omega.
The deal appears as a strategic one for Omega Healthcare, in that it eliminates Aviv REIT as a rival competitor while also enhancing the advantage Omega holds with respect to its cost of capital. Aviv REIT’s shareholders will also benefit mightily from the deal, as they will realize a sizable premium on their current shares of Aviv stock, and the shares they will receive in the new company will also allow them to realize future earnings from the merger. Pursuant to the merger agreement, Aviv’s shareholder will receive 0.9 shares of Omega stock for each share of common stock that they own. Based on the closing price of Omega’s stock at the end of October, Aviv’s shareholders will realize a per share premium of roughly 16 percent on the deal.
The new deal appears to be a win-win for both companies, and both Mr. Pickett and Mr. Bernfield acknowledged this in their statements on the deal. Mr. Pickett expressed his excitement over the merger, saying, “The combination of Omega and Aviv creates the premier pure-play skilled nursing facility REIT which, with the expertise and proven track records of the combined management teams, will be well-positioned to continue as the leading consolidator in the large, highly fragmented SNF industry.” This statement was largely echoed by Mr. Bernfield, who commented, “This is a strategic combination of two best-in-class companies that have been the most dedicated and successful investors in the skilled nursing sector over the past few decades. The combined company will now be positioned to be the premier consolidator of SNF real estate for years to come.”
The merger is expected to close early next year. Afterward, Omega’s shareholders should own roughly 70 percent of the new company, and Aviv REIT’s shareholders should own the remaining 30 percent.