Ventas Inc. said Monday that it will buy Nationwide Health Properties Inc. in a $5.8 billion stock deal, creating the nation's largest health care real-estate investment trust.
The Nationwide purchase solidifies Ventas' position as a leading owner of senior housing communities, along with real estate properties including skilled nursing facilities, hospitals, and office buildings. The move also will make the company more diverse, combining Ventas' health care facilities with Nationwide's focus on senior housing and long-term care facilities.
The company will have more than 1,300 assets in 47 states, the District of Columbia, and two Canadian provinces. That includes operating 643 senior housing facilities and 379 skilled nursing facilities.
Ventas said private pay sources will account for 70 percent of the company's net operating income. Meanwhile, senior housing will account for about 55 percent of the combined company's net operating income, with skilled nursing facilities and medical office buildings accounting for about 22 percent and 11 percent, respectively.
Health care is one of the fastest growing segments of the economy, and both companies foresee growth as the population ages with the first wave of 79 million baby boomers turning 65 in 2011. Health care spending is projected to grow to 20 percent U.S. gross domestic product by 2019, from about 18 percent today.
"The combination of Ventas and NHP increases the scale and diversification of the combined company, the strength and flexibility of the company's balance sheet and the quality and geography of the assets," said Ventas Chairman and CEO Debra A. Cafaro.
Cafaro will continue in both positions in the combined company. Nationwide Chairman, President and CEO Douglas M. Pasquale will be a senior adviser during the transition. After the deal closes, Pasquale and two other Nationwide directors will be added to the board, expanding it to 13 members.
Pasquale said a key reason for deal from Nationwide's perspective was to foster more growth as the field becomes more competitive. "Our investors will see value today as well as significant upside in the future," Pasquale said.
In October, Chicago-based Ventas announced it was buying the real estate assets of Atria Senior Living Group for $1.5 billion. That acquisition marked the sixth major deal for Ventas in the last six years.
The latest deal is equivalent to $44.99 per share for Newport Beach, Calif.-based Nationwide, marking a 15 percent premium to Friday's closing price. Ventas said that Nationwide shareholders will receive 0.7866 Ventas shares for each share of stock they own. Based on Nationwide's number of shares outstanding, the deal is valued at $5.8 billion.
In early trading Monday, Nationwide shares jumped 9 percent, or $3.57, to $42.53. Ventas shares fell $2.25, or 4 percent, to $54.94.
Ventas will own 65 percent of the combined company after the deal closes, which is expected in the third quarter.
Also on Monday, Nationwide said its fourth-quarter profit rose 14 percent to $35.3 million, or 27 cents per share, from $30.9 million, or 27 cents per share, during the year-ago period when there was less stock outstanding. Revenue rose 20 percent to $116.7 million from $97 million.
The company said its funds from operations fell 2.3 percent to $60.4 million, or 47 cents per share. FFO, which adds in such items as amortization and depreciation, is considered key to measuring the financial performance of real estate investment trusts.
After adjustments, the company said it had FFO of 60 cents per share. Analysts polled by FactSet expected FFO of 59 cents per share on $110.3 million in revenue.
On Feb. 17, Ventas reported a 43 percent boost in fourth-quarter profit to $77.6 million on a 13 percent rise in revenue to $268 million. The company had FFO of $121.4 million, or 77 cents per share.
Shares of Ventas fell $1.17, or 2.1 percent, to $56.02 in morning trading, though the stock reached a 52-week high of $57.42 at the start of the session. Shares of Nationwide surged $4.27, or 11 percent, to $43.23.