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Ventas (VTR) to Acquire New Senior Investment in $2.3B Deal

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Ventas, Inc. (VTR - Free Report) has entered into a definitive merger agreement to acquire New Senior Investment Group Inc. in an all-stock $2.3-billion transaction. The move is a strategic fit, given the scope to capitalize on the senior housing industry recovery. Particularly, it is expected to be roughly 9-11 cents accretive to Ventas’ normalized funds from operations (FFO) per share on a full-year basis.

The transaction, likely to close during the second half of 2021, will significantly enhance Ventas’ property base, adding New Senior Investment’s high-quality, geographically-diversified portfolio of 103 private pay senior living communities, including 102 independent living communities, located across 36 states in the United States.

Deal Details

Per the terms of the deal, shareholders of New Senior will get 0.1561 shares of the newly-issued Ventas stock for each share of New Senior’s common stock. Based on the closing price of Ventas common stock on Jun 25, this represents $9.10 per New Senior share. This reflects a 31% equity premium based on New Senior’s 30-day trading average, and a 10% premium on New Senior’s total enterprise value.

Deal Benefits

The transaction will enhance Ventas’ platform with New Senior’s high quality, independent living portfolio in advantaged markets that enjoy positive supply demand fundamentals. This will help the company cater to a large and growing middle-income senior population. Also, it will fortify Ventas’ present relationships with leading operators as well as add new operators.

Markedly, in light of the effective vaccine roll-outs and resilient demand from a fast increasing population of seniors, the independent living senior housing industry is poised for solid growth in the upcoming years.

Therefore, the transaction will poise Ventas well for growth, expanding its participation in the robust senior housing recovery through its Senior Housing Operating (SHOP) portfolio.

Particularly, its total Senior Housing portfolio concentration will increase from 44% to 48% of first-quarter 2021 annualized adjusted net operating income (NOI), while the SHOP portfolio mix will increase from 26% to 31%. Also, its SHOP portfolio’s independent living unit mix will go up from 48% to 58%.

The transaction valuation is estimated to represent roughly a 6% capitalization rate on expected New Senior 2022 NOI. Further, Ventas projects to realize $16-$18 million in annualized corporate general and administrative synergies starting 2022. In addition, the deal will expand Ventas’ exposure to independent living in the United States.

Shares of this Zacks Rank #3 (Hold) company have gained 19.4% over the past six months compared with the industry's growth of 19.2%.

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Stocks to Consider

Mack-Cali Realty Corporation’s (CLI - Free Report) Zacks Consensus Estimate for 2021 FFO per share moved up marginally upwards over the past week. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Geo Group Inc’s (GEO - Free Report) Zacks Consensus Estimate for the current-year FFO per share moved marginally north in the past month. The company carries a Zacks Rank of 2, at present.

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