Ventas Buys Nationwide Health in $7.4B Transaction

The stock-for-stock merger will create the industry's largest healthcare REIT.

March 1, 2011
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user cote

A new force in the healthcare real estate industry is about to come to the fore. Ventas Inc. has signed on to acquire Nationwide Health Properties Inc. in a $7.4 billion, stock-for-stock merger agreement that will create the largest healthcare REIT.

As per terms of the definitive agreement, Ventas will acquire all outstanding shares of NHP stock at a consideration that equates each NHP share with $44.99 of Ventas stock, marking a premium of about 15 percent over NHP’s closing stock price on Friday, February 25. The uniting of the two REITs will result in a company with a $23 billion pro forma enterprise value and a 1,367-property portfolio spanning 47 states, including the District of Columbia, and two Canadian provinces. The behemoth new entity will produce an anticipated annual net operating income totaling approximately $1.3 billion, with seniors housing accounting for 55 percent of the total, followed by skilled nursing facilities and medical office buildings, which will provide a respective 22 percent and 11 percent of the NOI.

While the merged company’s MOB assets, which will total 14 million square feet, are calculated to account for the smallest segment of NOI, the sub-sector will be well positioned to increase its contribution. NHP will bring to the table its agreement with developer Pacific Medical Buildings L.L.C., which includes the right to acquire more than $1 billion of newly built MOBs on the West Coast at a discount to fair market value.

“The combination of Ventas and NHP increases the scale and diversification of the combined company, the strength and flexibility of the company’s balance sheet and the quality and geography of the assets,” Debra A. Cafaro, chair and CEO of Ventas, noted. “With Ventas’s successful track record of value-creating transactions and NHP’s longstanding history of regional, asset-level acquisitions, taken together with one of the strongest balance sheets in the REIT industry, the combined company will have a unique opportunity for continued external growth.”

Both Ventas’s and NHP’s boards of directors gave the proposed merger an enthusiastic thumbs up in a unanimous vote. Not everyone involved is on board, however. On the heels of the REITs’ disclosure of the agreement came a slew of press releases from law firms announcing the initiation of investigations on behalf of NHP shareholders regarding a possible breach of fiduciary duty and other potential violations.

Meanwhile, the transaction remains on track to close in the third quarter of this year, at which point Ventas shareholders will have a 65 percent ownership stake in the new company, and NHP shareholders will claim the remaining 35 percent.