Ventas to Purchase Nationwide Health for $5.7 Billion as REIT Mergers Rise

Ventas Inc., the owner of more than 600 senior-care and medical properties, agreed to buy Nationwide Health Properties Inc. for about $5.7 billion in the biggest deal ever among health-care real estate investment trusts.

Ventas will pay 0.7866 of its stock for each Nationwide share, the Chicago-based company said today in a statement. That’s equal to about $44.99 as of Ventas’s closing share price on Feb. 25, a 15 percent premium to Nationwide’s close that day. The Newport Beach, California-based company has about 126.3 million shares outstanding.

The deal will form the largest health-care REIT in the U.S., according to the statement. Property deals are rising in the industry as real estate values recover. HCP Inc., currently the biggest U.S. health-care REIT by market value, agreed in December to buy 338 properties from Carlyle Group’s HCR ManorCare Inc. for $6.1 billion.

“The really big growth driver in health care is acquisitions,” Craig Guttenplan, an analyst at CreditSights in London, said in a telephone interview. “This is kind of a one- off deal to make them more competitive in the private market.”

Health Care REIT

Health Care REIT Inc., a Toledo, Ohio-based owner of senior housing and health-care properties, said after the close of trading today that it will pay $2.4 billion for most of the real estate assets of Genesis HealthCare. The company will acquire 147 post-acute, skilled nursing and assisted-living facilities in 11 states, according to a statement.

Photographer: Tim Boyle/Bloomberg

Ventas Chairman and Chief Executive Officer Debra Cafaro. Close

Ventas Chairman and Chief Executive Officer Debra Cafaro.

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Photographer: Tim Boyle/Bloomberg

Ventas Chairman and Chief Executive Officer Debra Cafaro.

Health care is the single-largest industry in the U.S. based on contribution to gross domestic product, HCP said on its website. The industry will account for about 20 percent of the economy by 2019, Ventas said in a January presentation.

Nationwide shares climbed $3.78, or 9.7 percent, to $42.74 as of 4:15 p.m. in New York Stock Exchange composite trading. Ventas shares dropped 3.1 percent to $55.42

Ventas shareholders will own about 65 percent of the combined company when the deal is completed, and Nationwide shareholders will have about 35 percent, according to the statement. The deal is expected to close in the third quarter.

The transaction will boost earnings and will help the company reduce debt costs, Ventas Chairman and Chief Executive Officer Debra Cafaro said in a telephone interview. She will lead the combined company.

“It improves our balance sheet,” Cafaro said. “It improves our credit profile. We think it will create positive ratings momentum.”

Senior Housing

Ventas announced almost $4 billion in acquisitions in 2010, Cafaro said in a conference call with investors on Feb. 17. Those deals, which included the purchase of almost all the real estate assets of Atria Senior Living Inc., made Ventas the largest U.S. owner of senior housing in the U.S., Cafaro said.

“With respect to the investment environment, 2010 was a banner year for investments by health-care REITs,” Raymond Lewis, president of Ventas, said on the Feb. 17 call. “Many factors contributed to this record performance including capital access and liquidity advantages for public REITs over private buyers, positive investments spreads over our cost of capital, and private-equity funds monetizing their health-care assets to create liquidity for their investors.”

Ventas saw “bigger fish to go after” in 2011, as well as “middle-sized opportunities” ranging from $300 million to $600 million, Lewis said.

“Health-care real estate is an over $700 billion market,” Cafaro said. “The REITs themselves own less than 10 percent of that market.”

Ventas expects $15 million in savings from the Nationwide deal in the first year, the company said today on a conference call with investors. The combined company will have about $1.3 billion of net operating income.

To contact the reporter on this story: Oshrat Carmiel in New York at ocarmiel1@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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