By Angela Chen
Ventas Inc. on Monday agreed to buy hospital operator Ardent
Medical Services, Inc. for $1.75 billion in cash, and said it would
spin off its skilled nursing facilities into an independent
real-estate investment trust.
Ventas, based in Chicago, is one of the biggest U.S. health care
REITs and operates senior-living communities, hospitals and medical
office buildings.
Nashville-based Ardent is one of the 10 largest for-profit
hospitals in the U.S. and generates about $2 billion in annual
revenue. Ventas will now own 10 hospitals and real estate operated
by Ardent under various names in Texas, Oklahoma and New
Mexico.
Ardent will be entitled to distribute up to $75 million in
excess cash to its shareholders.
"The addition of Ardent's platform, which includes high-quality
assets with significant market share in three key markets, and a
highly-regarded hospital management team, creates a strong avenue
for growth in the attractive hospital real-estate market," Ventas
Chief Executive Debra Cafaro said. The addition helps diversifies
Ventas' hospital real estate by property type and operator, she
said. The company plans to participate in Ardent's future hospital
acquisitions.
When the deal closes, Ventas will separate Ardent's hospital
operations from its real estate. It will sell these hospital
operations to a new entity owned by Ardent, in which Ventas has a
9.9% stake. The two will enter a long-term lease.
The transaction is expected to add to Ventas' funds from
operations by 8 to 10 cents in the first full year after close.
The REIT spinoff will comprise 355 skilled nursing facilities
and other health care assets operated by 44 regional and local care
providers. The average lease doesn't expire for 10 years and the
portfolio includes facilities in 37 states. It is expected to
generate funds from operations of $240 to $245 million in its first
full year.
Ventas President Raymond Lewis will be the spinoff's CEO. He
said the separation will allow for "significant consolidation
opportunities." Under the terms, Ventas shareholders will receive
one common share of the spinoff for every four shares they
currently own.
The Ardent deal is expected to close midyear, and the spinoff is
expected to close in the second half of 2015.
Shares of Ventas were up about 2% in light premarket trading.
The stock is up around 2% this year through Thursday's close.
Write to Angela Chen at angela.chen@dowjones.com
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