Combined Company will have more than 550 Properties, Including Senior Housing and Medical Office Properties
Toledo, OH-based Health Care REIT Inc. (NYSE:
HCN) agreed to acquire Indianapolis-based Windrose Medical Properties Trust (NYSE:
WRS) in a deal valued at $877 million, including the assumption of some $426 million in debt.
The merger of the two midwest REITs creates a company with more than 550 properties in 37 states and about $4 billion in real estate assets. The combined entity will have properties spanning senior living, medical office and hospital facilities.
At a 19% premium to Tuesday's Windrose's stock
price, the all-stock transaction could prove to be a catalyst for other small-cap healthcare REITs, noted Citigroup REIT analysts Jonathan Litt and Craig Melcher in a note to investors.
Healthcare REITs are trading at a 17% discount to the other REITs based on forward FFO multiples, vs. a historical 4% discount, the analysts noted. If the economy accelerates, the healthcare sector could weaken, but if the economy slows the sector could continue to benefit from its defensive nature.
In commenting on the acquisition, George Chapman, chief executive officer of Health Care REIT commented, "Our strategic merger with Windrose creates a platform capable of driving superior growth throughout the full spectrum of senior housing and health care real estate. The enhanced tenant base and asset diversification produces an even stronger combined entity. We intend to capitalize on the additional opportunities presented in property management and development, while the increased diversification provided by this combination should provide a more secure revenue stream through different operating cycles generating higher quality dividends and incremental value for our stockholders."
"We look forward to the opportunity to grow our new platform with greater access to reasonably priced capital, while providing existing Windrose stockholders with an approximate 23% increase in annualized dividends per share and an excellent premium on their investment," added Fred Klipsch, chief executive officer of Windrose, will join the board of Health Care REIT.
Under the terms of the agreement, each outstanding share of Windrose will be exchanged for 0.45 shares of Health Care REIT common stock, representing a price of $18.06 per share, based on Tuesday’s closing prices. When the deal is completed, Windrose shareholders will own about 15 percent of Health Care REIT’s stock.
With an eye towards expansion, Health Care REIT plans to provide Windrose with an interim line of credit up to $150 million to finance future acquisition opportunities.
Deutsche Bank Securities served as Health Care REIT’s financial advisor and JPMorgan acted as advisor to Windrose.
The merger, expected to close by year end, must still be approved by Windrose’s shareholders but does not require approval of Health Care REIT stockholders.