MedEquities Realty Trust (NYSE: MRT) will be acquired by Omega Healthcare Investors (NYSE: OHI) for nearly $900 million. The deal was announced on January 2, 2019 and is expected to close in the first half of the year.
The target is a self-managed and self-administered real estate investment trust (REIT) that invests in healthcare properties within the acute, post-acute, skilled nursing and behavioral health sectors. It owns 34 facilities in seven states with 2,755 beds run by 10 different operators. About 75% of the beds are skilled nursing with some assisted living, and the remainder include LTACs, IRFs, behavioral health facilities and a medical office building.
Omega Healthcare Investors is a REIT that invests in healthcare properties, with a focus on skilled nursing facilities. It owns in excess of 1,000 properties in 42 states and the United Kingdom with more than 77 different operators. It has a market capitalization in excess of $8.0 billion, compared with MedEquities’ market cap of just $345.2 million.
The stock and cash transaction is valued at about $633 million plus $265 million of net debt. MedEquities stockholders will receive a fixed exchange ratio of 0.235 Omega common shares plus $2.00 in cash for each share of MedEquities common stock held by them, which represents a value of $10.26 per MedEquities share based on the $35.15 closing price for Omega common stock on December 31, 2018.
Separately, MedEquities will declare a special cash dividend of $0.21 per share payable to the holders of record of MedEquities common stock as of the end of trading on the New York Stock Exchange on the trading day immediately prior to the closing date of the transaction. There are no changes planned to Omega’s board of directors or executive officers related to the merger transaction.
EBITDAR coverage for the SNFs has been about 1.1x on a facility level, but 2.6x on the guarantor level. The coverage on the other assets has been better. The largest tenant was OnPointe (1,138 beds), but they were replaced by Creative Solutions in Healthcare in a re-tenanting that should be effective this month.