Brookdale Senior Living Up with Emeritus Deal - Analyst Blog
February 24 2014 - 6:00PM
Zacks
Shares of Brentwood, TN-based Brookdale Senior Living
Inc. (BKD) rose 1.5% to $30.55 on Feb 21 as the company
signed a definitive agreement to acquire Seattle-based senior
housing services company Emeritus Corp. (ESC) a
day before.
Under the agreement, shareholders of ESC will receive 0.95 shares
of BKD for each share, putting the value of ESC at about $28.59 a
share, representing about 33% premium to closing price on the day
the deal was signed. Including debt, the deal is valued at about
$2.8 billion.
The uptick in BKD’s price is likely given the expansion of
Brookdale’s presence in large population states. Further, a growing
number of citizens living in senior-housing communities will
support the merged entity’s growth. It is for this reason BKD’s
Chief Executive Officer (CEO) Andy Smith is confident about driving
long-term revenue growth, despite having only 10% post-merger
market share.
The deal is a major footstep for BKD, which became public not too
long ago, in 2005. It was New York-based private-equity firm
Fortress Investment Group which acquired the company in 2000 and
holds a 14% stake (largest) in BKD as of Dec 31, 2013.
The merged company will offer services such as assisted living,
dementia care, skilled nursing, outpatient therapy, home health and
hospice care in more than 1,100 locations. It will increase BKD’s
units by more than two-thirds to 112,700 as it expands into the
West and Northeast states. BKD’s units in California, New York, New
Jersey and Massachusetts will increase twofold due to the deal.
The merger deal is also favorable for BKD given the impressive
fourth quarter and full year 2013 results by ESC on Feb 20. ESC’s
community, ancillary services, and management fee revenues
escalated 24.6% to $101.2 million in the fourth quarter and rose
39% to $541.7 million in the year. Adjusted EBITDAR also spiked
25.6% to $29.8 million in the quarter and surged 36.3% to $141.6
million in 2013.
On the management front, Smith will be the CEO of the merged entity
while the CEO of ESC will join the board of directors and continue
in a consulting role. Currently, shareholder rights attorneys at
Robbins Arroyo LLP are investigating the proposed merger.
Currently, BKD sports a Zacks Rank #1 (Strong Buy), while ESC
carries a Zacks Rank #3 (Hold). Other players in the healthcare
industry, which look attractive at present, include
Enzymotec Ltd. (ENZY) and NuVasive,
Inc. (NUVA). Both of them carry a Zacks Rank #1 (Strong
Buy).
BROOKDALE SENR (BKD): Free Stock Analysis Report
ENZYMOTEC LTD (ENZY): Free Stock Analysis Report
EMERITUS CORP (ESC): Free Stock Analysis Report
NUVASIVE INC (NUVA): Free Stock Analysis Report
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