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Hudson Bay Urges Sabra Holders to Reject Care Capital Deal

Updated on
  • New York hedge fund has built 3.2 percent position in Sabra
  • Sabra shares trading down 14 percent since deal disclosed

Hudson Bay Capital Management has taken a stake in nursing home owner Sabra Health Care REIT Inc. and is urging shareholders to vote against a proposed takeover of Care Capital Properties Inc.

“We are being asked to approve a transaction that has caused a massive decline in Sabra’s stock price and trading multiples,” Hudson Bay Chief Executive Officer Sander Gerber wrote to Sabra shareholders in a letter Thursday. The New York-based hedge fund said it owns about 3.2 percent of Sabra’s shares, making it the sixth largest holder in the company, according to data compiled by Bloomberg.

Sabra’s shares have tumbled more than 13 percent since announcing the all-stock deal to acquire Care Capital in May. Care Capital fell 4.7 percent over the same period, erasing the initial gains after the deal was disclosed. The Dow Jones Equity REIT Total Return Index gained 1.3 percent during that time.

Care Capital was unchanged at $25.54 after rising as much as 1 percent Thursday. Sabra shares rose as much as 2.8 percent, before closing up 0.4 percent at $23.08.

Sabra Chief Executive Officer and Chairman Richard Matros defended the Care Capital deal, saying it would give the combined company access to a much larger credit facility that would make it more competitive on future acquisitions.

“We think this is a terrific deal for our shareholders,” Matros said in a phone interview. “It gives us scale, diversity, lowers our cost of capital, and it broadens our tenant base, which is actually a huge issue.”

A representative for Care Capital didn’t respond to requests for comment.

Deal Premium

Under the terms of the deal, Care Capital shareholders would receive 1.123 shares of Sabra for each share of Care Capital, the companies said at the time. That represented about a 12 percent premium to Care Capital’s closing price on May 5, prior to the announcement.

Sabra’s management team would lead the combined company, which would have an equity market value of about $4.3 billion and keep the Sabra name. The combined company would have an enterprise value of about $7.4 billion, and create a health-care REIT with a combined 564 investments, the companies said.

The deal requires approval from a majority of the shareholders who cast a ballot at an Aug. 15 meeting for the transaction to proceed. Gerber urged Sabra shareholders to vote against the deal rather than merely abstain.

“We hope that it is as clear to you as it is to us that voting against the CCP acquisition maximizes the value that we, as collective holders of Sabra shares, deserve for our investment,” Gerber wrote.

Irvine, California-based Sabra is a real estate investment trust that owns nursing homes, assisted-living facilities and rehabilitation and independent-living centers. Chicago-based Care Capital acquires and leases skilled nursing facilities and other health-care properties.

(Updates with Sabra CEO’s comment in fifth paragraph.)
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