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Omega Healthcare to Buy MedEquities Realty in $600M Deal

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Omega Healthcare Investors, Inc. (OHI - Free Report) has announced a cash and stock deal to acquire MedEquities Realty Trust, Inc. (MRT - Free Report) . Valued at around $600 million, the transaction is likely to help Omega Healthcare to diversify its assets as well as operators.

Specifically, per the agreement, MedEquities stockholders will receive 0.235 Omega common shares and $2.00 in cash for each share of MedEquities common stock owned by them. Based on the closing price of $35.15 for Omega common stock on Dec 31, 2018, this equates to a value of $10.26 per MedEquities share.

Expected to close in the first half of 2019, the move is a strategic fit for the company with anticipated annual funds from operations (FFO) per share accretion of around 5 cents per Omega share. With nine new operators slated to come on board, the move will improve operator diversification.

Property type diversification will augment non-skilled nursing assets moderately by $296 million, which would include $75 million invested in a hospital facility that is leased to a subsidiary of Baylor, Scott & White Health. Omega Healthcare will acquire the fee simple interest in 34 facilities operated by 11 operators across seven states as well as purchase approximately $34 million in mortgage loans.

In the words of Taylor Pickett, Omega Healthcare’s Chief Executive Officer, “This acquisition reinforces our commitment to the skilled nursing and senior housing industry, while adding new asset types to our portfolio furthering our strategic objectives.”

Approved by the boards of directors of both the companies, the transaction is now subject to customary closing norms, together with the nod from the stockholders of MedEquities. A special cash dividend of 21 cents per share will be declared by MedEquities to its shareholders of record on the trading day immediately before the closing date of the transaction.

Omega Healthcare is expected to ride on growth curve, given its focus on accretive buyouts this year, after closing the sale of most of its assets and repositioning itself in 2018. The stock currently has a Zacks Rank #2 (Buy). The company’s shares have gained 5.7% in three months’ time against the industry’s decline of 5.2%.



Other Stocks to Consider

Other favorably-ranked stocks from the real-estate space include Lamar Advertising Company (LAMR - Free Report) and PS Business Parks, Inc. (PSB - Free Report) , each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lamar’s FFO per share estimates for 2019 has been revised 1.6% upward to $5.89 in the past 30 days.

PS Business Parks’ Zacks Consensus Estimate for 2019 FFO per share moved north marginally to $6.58 in the past two months.

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