The long-term-care industry got a jolt last week by the announcement of a potential $860 million deal, with Omega Healthcare Investors agreeing to purchase 80 facilities from CapitalSource, including an option to buy another 63 facilities by 2011.
Big deal for long-term care
Omega to buy 80 facilities now, option for 2011
It's one of the largest blocks of long-term-care facilities to go up for sale in recent memory, and puts Omega Healthcare Investors among the biggest long-term-care holding companies in the nation, analysts said.
“It is a big deal,” said Peter Martin, managing director of JMP Securities in San Francisco. “You don't often get portfolios of this size, at least not in the long-term-care space.”
The two companies announced on Nov. 17 that they had reached a three-phase agreement to transfer ownership of the facilities. In the first phase, Omega has agreed to acquire 40 long-term-care facilities in 12 states for $269 million in cash, stocks and debt to close in late 2010 or early 2011. In addition, Omega could spend $25 million for the option to purchase another 63 facilities for an additional payment of $295 million in cash prior to the end of 2011.
In the second phase, Omega said it will agree to spend $271 million in cash and stocks for another 40 facilities in two states, with an expected closing date of April 1, 2010.
By the end of 2011, Omega could exercise the option to purchase the remaining 63 facilities in 19 states for $295 million in cash.
Daniel Booth, Omega's chief operating officer, in a conference call announcing the deal, said it diversifies the Hunt Valley, Md., company's geographic reach and operations.
In June, Omega entered into a new $200 million revolving senior secured credit facility through Banc of America Securities and Deutsche Bank Trust Company Americas. Omega said it would use the new credit facility for acquisitions and general corporate purposes. “Our ability to conservatively manage and protect our very strong balance sheet through the market turmoil over the past two years has positioned Omega to enter into this purchase agreement,” said Taylor Pickett, Omega's president and CEO, in a statement.
If Omega purchases all 143 of the Capital Source facilities, at a total price of $860 million, it would hold nearly 400 long-term-care facilities in its portfolio, making it a market leader. The company is expected to lend funds to the care facility operators to make capital improvements, thereby attracting more customers to its skilled-nursing facilities.
Martin said it is highly likely Omega Healthcare will take advantage of the full scope of the deal and buy up all the properties on the table.
Meanwhile, CapitalSource of Chevy Chase, Md., is exiting healthcare with this agreement. “This transaction is another important step in our ongoing transformation to a bank model,” said John Delaney, CapitalSource chairman and CEO, in a statement.
The deal follows another long-term-care transaction announced Nov. 3 in which RehabCare Group, St. Louis, reached a definitive agreement to merge with Triumph HealthCare, Houston, in a transaction valued at $570 million, subject to adjustment (Nov. 9, p. 15). That transaction is expected to close on or about Dec. 1, pending customary closing conditions, including regulatory approvals.
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