Ventas to Acquire Ardent Health Services for $1.75B, Spin Off Skilled Nursing Portfolio

CHICAGO — Ventas Inc. (NYSE: VTR), a seniors housing and healthcare REIT, has signed a definitive agreement to acquire Ardent Medical Services Inc. for $1.75 billion in cash. Ardent Medical, a subsidiary of Nashville-based Ardent Health Services, is one of the 10 largest for-profit hospital firms in the United States. The privately owned Ardent Medical will be entitled to distribute up to $75 million in excess cash to its existing shareholders as part of the transaction.

Ardent Health Services is owned by private equity funds managed by Welsh, Carson, Anderson & Stowe and currently generates approximately $2 billion in annual revenues, with more than 50 percent of its revenue derived from private pay.

Ventas intends to separate Ardent Health Services’ hospital operations from its owned real estate and sell the hospital operations to one or more newly formed entities owned by current management of Ardent Health Services, other equity sources, and up to 9.9 percent owned by Ventas.

As part of the transaction, Ventas will own 10 high-quality hospitals and related real estate operated by Ardent under the names BSA Health System in Amarillo, Texas; Hillcrest HealthCare System in Tulsa, Okla.; and Lovelace Health System in Albuquerque, N.M. These assets comprise 3.2 million square feet and 2,045 beds.

“This transaction builds upon our excellent track record of executing innovative and value-creating opportunities, and solidifies our leadership position in healthcare real estate,” says Debra Cafaro, chairman and CEO of Ventas. “The addition of Ardent’s platform, which includes high-quality assets with significant market share in three key markets, and a highly regarded hospital management team, creates a strong avenue for growth in the attractive hospital real estate market.”

Ventas expects to fund the transaction on a leverage neutral basis with proceeds from previously announced dispositions and loan repayments, bank debt and long-term debt and equity capital sources. The deal is expected to close mid-2015.

UBS Investment Bank is serving as exclusive financial advisor to Ventas, and Kirkland & Ellis LLP and Waller Lansden Dortch & Davis LLP are serving as legal advisors in connection with the transaction. Barclays is serving as exclusive financial advisor to Welsh, Carson, Anderson & Stowe, and Ropes & Gray LLP is serving as legal advisor. Katten Muchin Rosenman LLP is serving as legal advisor to Ardent Health Services.

Ventas Plans SNF Spin Off

The board of directors at Ventas has unanimously approved a plan to spin off most of its post-acute/skilled nursing facility (SNF) portfolio into an independent, publicly traded REIT. The new REIT will own 355 triple-net leased SNFs and other healthcare assets operated by 44 private regional and local care providers

The new company’s portfolio will span 37 states, and will have a diversified operator base, whereby no single tenant is expected to constitute more than 10 percent of the company’s NOI, with the exception of Senior Care Centers (12 percent). The portfolio’s weighted average remaining lease term is approximately 10 years. In its first full year of operations, the company is expected to generate estimated NOI of $315 million to $320 million and estimated funds from operations of $240 million to $245 million.

Upon completion of the spin-off, Raymond Lewis, president of Ventas, will serve as CEO and as a director of the new company. Douglas Crocker II, presiding director of Ventas, will serve as the independent non-executive chairman of the new company’s board of directors.

Centerview Partners and Bank of America Merrill Lynch are serving as financial advisors to Ventas, and Wachtell, Lipton, Rosen & Katz is serving as legal advisor in connection with the spin-off.

Chicago-based Ventas has more than 1,600 seniors housing and healthcare properties in its portfolio. The assets are located in the United States, Canada and the United Kingdom. Additionally, Ventas provides management, leasing, marketing, development and advisory services to hospitals and health systems through its Lillibridge subsidiary.

The stock price for Ventas closed on Friday, April 3 at $73.22 per share, up from $63 per share at this time last year.

— John Nelson