Toledo, Ohio is a hotbed of healthcare deal making, all of a sudden. Three companies based there joined together to carve up HCR ManorCare, the financially beleauered tenant of Toledo-based Quality Care Properties, Inc. (NYSE: QCP). Welltower Inc. (NYSE: WELL) and not-for-profit ProMedica Health System joined the fray, and it became one complicated deal.

Quality Care Properties was spun out from HCP, Inc. in October 2016, taking with it HCP’s skilled nuring assets, most of which were operated by HCR ManorCare (HCRMC). As of December 31, 2017, QCP owned 259 skilled nursing facilities with 22,205 beds, 59 assisted living/memory care communities with 3,843 units, one 37-bed surgical hospital and one medical office building.

HCRMC is one of the largest post-acute companies in the United States. As of December 31, 2017, it operated 109 home health and hospice offices in 23 states, as well as 296 skilled nursing and assisted living facilities in 25 states.

First, Welltower agreed to acquire Quality Care Properties in an all-cash deal for $20.75 per share ($1.95 billion). Adding in approximately $2.05 billion of debt carried by QCP and HCRMC, the total cost to Welltower is about $4.0 billion.

At the same time, Welltower and ProMedica formed an 80/20 (respectively) joint venture to acquire the real estate belonging to QCP’s principal tenants, HCRMC and Arden Courts.

Welltower wanted the real estate, of course. That left ProMedica to acquire the long-term care and post-acute operations of HCRMC, the second-largest provider of those services in the United States.

The latter deal gives ProMedica a huge platform in the home health, post-acute and memory care markets, with more than 50,000 employees providing services in 450 assisted living facilities, skilled nursing and rehabilitation centers, memory care communities, outpatient rehab clinics, and hospice and home health agencies. They operate under the brand names Heartland, ManorCare Health Services and Arden Courts.

Before the deal was announced, ProMedica Health System comprised 13 hospitals in Michigan and Ohio, as well as six ambulatory surgery centers and about 300 other facilities. It is also the parent of an HMO, Paramount Health Care, and ProMedica Physicians, with some 900 healthcare providers.

The home health business is the largest piece of the deal, and garnered an estimated $1.04 billion. The price is based on 8.0x operating income, and the operating margin for the home health portion of the business is about 22%.

Upon completion of these transactions, Welltower and ProMedica will enter into a new lease agreement with key terms that include a 15-year absolute triple-net master lease, with full corporate guarantee of  ProMedica; an 8% initial cash yield with rent coverage of 1.8xProMedica will invest as much as $400M of growth and upgrade capital over the next five years; underlying portfolio EBITDAR comprised of 70% post-acute and 30% seniors housing; and a Year One escalator of 1.375% and 2.75% annual escalator thereafter.

With all the disruptor deals that have been announced in the past six months, the rationale for this one by ProMedica’s president and CEO Randy Oostra, sounds like it just might work. “We want to take down the wall between traditional hospital and post-acute care services in an effort to enhance the health and well-being of our aging population,” he was quoted as saying in ProMedica’s release. “The lines are blurring between where health care begins and stops. This acquisition provides us the platform to think differently about health and aging.”

The time for thinking is getting shorter, and the time for operating is approaching fast. It remains to be seen how a 13-hospital system with some operations in six states (with outpatient programs in Indiana, Kentucky, Pennsylvania and West Virginia) effectively expands its footprint to 30 states, adds 50,000 employees to its approximately 17,000 currently on staff, and keeps the lights on everywhere. To quote President Trump, “Let’s see what happens.”