A flurry of healthcare company deals worth close to $12 billion was announced last week signaling strong interest in businesses providing long-term and senior care for two of the deals.
Long-term-care provider Genesis HealthCare Corp. unveiled a $1.7 billion plan to go private through a new joint venture; Ventas, an assisted-living-community operator, announced plans to buy Sunrise Senior Living REIT for $1.8 billion; and General Electric Co. said it would acquire the in-vitro and point-of-care diagnostics businesses of Abbott Laboratories in a deal valued at $8.13 billion.
“Private equity is interested in the (healthcare sector) because it gives them an opportunity to put large dollars toward an area that has sound, fundamental demographic drivers: population growth, aging, increased consumption,” said Scott Kellman, managing director of CIT Healthcare, a unit of New York-based CIT Group, a global financial services company that provides financial advice to businesses.
Following on the heels of United Surgical Partners International’s deal to be bought by private equity firm Welsh, Carson, Anderson & Stowe (Jan. 15, p. 12), publicly owned long-term-care provider Genesis HealthCare said it, too, would become a private company in 2007. On Jan. 16, Kennett Square, Pa.-based Genesis said it entered into an agreement to be acquired for a total of about $1.7 billion—including the assumption of about $450 million in debt—by a joint venture between Formation Capital, Alpharetta, Ga., and JER Partners, McLean, Va.
Jim McKeon, executive vice president and chief financial officer at Genesis, said acting as a private company will allow Genesis to make decisions based on the long-term, rather than be guided by short-term results.
A day earlier, Louisville, Ky.-based Ventas, a publicly owned healthcare real estate investment trust, unveiled its plans to purchase Sunrise Senior Living REIT, Toronto, a deal that includes 74 assisted-living communities in the U.S. and Canada. The deal also gives Ventas exclusive rights of first offer on newly developed assets in portions of the U.S. and Canada. Ventas said the deal, subject to closing conditions and approval from unitholders, is expected to generate about $387 million in 2007 and should close in the second quarter. Ray Lewis, executive vice president and chief investment officer at Ventas, said the deal continues the company’s “strategic growth and diversification plan” that has resulted in a little more than $3 billion in acquisitions since 2002.
Strong fundamentals are driving the interest in long-term and senior care. “The general sense is that there (are) good market fundamentals across most healthcare sectors,” Lewis said. “Senior housing is in a very strong place with limited new supply, increasing demand and with an aging demographic.”
Kellman added: “The age cohort over 80 is growing three times faster than any other segment of the population. This is driving consumption of healthcare resources and utilization of independent living, assisted-living and skilled-nursing facilities.”
The deal between Fairfield, Conn.-based GE and Abbott Park, Ill.-based Abbott, which requires regulatory approval, was announced Jan. 18 and is targeted to close in the first half of this year. The addition of Abbott’s core laboratory diagnostics businesses will broaden GE Healthcare’s diagnostic offerings, and reflects GE’s strategy to combine early diagnosis with information technology to enable a new “early health” model of care focused on pre-symptomatic disease detection and prevention, officials said in a news release. Meanwhile, Abbott officials said in a news release that the laboratory diagnostics market has changed considerably in the past decade with innovation increasingly driven by automation, system integration and other skills that GE has pursued.
