Health Care REIT, Inc. (HCN: Quote) said Wednesday that it has agreed to acquire Sunrise Senior Living, Inc. (SRZ: Quote) for $14.50 per share in cash. Following the announcement, shares of Sunrise are gaining more than 58 percent in pre-market trading.
The purchase price reflects a real estate value of approximately $1.9 billion, of which about $950 million will be paid in cash and the balance through the assumption of debt at an average interest rate of about 4.9 percent.
The deal, unanimously approved by the Sunrise board of directors, represents a 62.4 percent premium to the company's closing stock price of $8.93 on Tuesday, August 21.
The transaction requires approval by Sunrise shareholders and is expected to close in the first half of 2013, but is not subject to any financing contingency.
Toledo, Ohio-based Health Care mainly invests in senior living and health care properties. The acquisition will position Health Care among the largest owners of seniors housing in the world with over 58,000 units located in the U.S., Canada, and the U.K.
George Chapman, Health Care REIT's Chairman and Chief Executive Officer said, "This acquisition powerfully advances our strategic vision: own the highest quality, private pay seniors housing communities in strong, growing, affluent markets and align with experienced, dynamic management teams."
As part of the deal, Health Care will acquire McLean, Virginia-based Sunrise's 20 wholly-owned seniors housing communities and Sunrise's interest in joint ventures that own 105 seniors housing communities. The wholly owned communities are located in the U.S. and Canada, while the joint venture communities are located in the U.S. and the U.K.
Health Care noted that the communities have a median age of eight years, and 90 percent of the communities are Sunrise's mansion prototype.
The acquisition also includes a real estate pipeline of more than $2 billion that could be realized over time by purchasing additional interests from existing Sunrise joint venture partners, Health Care said.
At the time of acquisition, Health Care expects to own on average an approximately 28 percent interest in the 105 joint venture communities.
Of the 105 joint venture communities, 37 have purchase options that are exercisable in 2013, while 13 have purchase options exercisable in 2014, and 21 are subject to open buy/sell rights that could result in Health Care acquiring a 100 percent ownership interest.
Health Care expects the transaction to increase its private pay percentage to 77 percent from 74 percent. Sunrise will become Health Care's second largest operator at about 11 percent of the portfolio based on investment balance.
If the transaction does not close on or prior to February 21, 2013, as a result of certain closing extension rights that may be exercised by Health Care, Sunrise shareholders will be entitled to receive additional transaction consideration during the period beginning on February 21, 2013.
HCN closed Tuesday's trading at $59.75, down $0.13 on a volume of 1.13 million shares.
SRZ closed Tuesday's trading at $8.93. In Wednesday's pre-market, the stock is adding $5.22 or 58.45 percent to $14.15.
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by RTT Staff Writer
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