[July 07, 2015] |
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Ventas and Equity Group Investments Announce Ardent Hospital Operating Company Transaction
Ventas, Inc. (NYSE: VTR) ("Ventas") and an entity controlled by Equity
Group Investments ("EGI"), today announced the signing of a definitive
agreement whereby the hospital operations of Ardent Health Services
("AHS"), will be majority owned by EGI, with Ventas owning a 9.9 percent
interest, and current AHS management holding a significant ownership
stake. Ventas previously announced plans to acquire AHS, a premier
provider of healthcare services and one of the ten largest
investor-owned hospital companies in the U.S., while retaining the owned
real estate and selling the hospital operations of AHS to a newly formed
and capitalized operating company ("Ardent").
The EGI-Ventas transaction values Ardent at approximately $475 million,
subject to working capital and other adjustments. At closing, which is
expected to occur in the third quarter of 2015, Ventas and Ardent will
enter into pre-agreed, long-term, triple-net leases with initial annual
base rent of $105 million. Based upon Ventas's continued expectation of
an approximate $1.4 billion investment in the AHS-owned real estate
(inclusive of Ventas's previously announced purchase of a minority
ownership stake of the real estate of a partner in one of AHS's hospital
service areas), Ventas now expects the unlevered cash rental yield on
its real estate investment to be approximately 7.5 percent. Ventas
expects to receive a $900 million five-year unsecured bank loan to
finance a portion of its investment.
"We are delighted to partner with EGI and Ardent's management in this
transaction," said Ventas Chairman and Chief Executive Officer Debra A.
Cafaro. "With Ardent, we are well positioned to grow in the large,
fragmented and rapidly consolidating $1 trillion domestic hospital
segment. We believe that hospitals will continue to be at the core of
the healthcare delivery system, supported by attractive demographics,
policy and an improving economy, which we expect will expand the ranks
of insured individuals and improve provider revenues."
David T. Vandewater, President and Chief Executive Officer of Ardent,
said, "With these strong partners of EGI and Ventas, we believe we can
build upon our success and provide additional capital to our facilities
and expand into new service areas. This new partnership will be a
significant benefit to hospitals, health systems and communities across
the country."
Both the acquisition by Ventas of AHS and the acquisition by EGI of
Ardent are subject to the satisfaction of certain specified closing
conditions, including receipt of regulatory approvals and are expected
to close concurrently in the third quarter of 2015.
Ardent's best-in-class management team, under President and Chief
Executive Officer David Vandewater, will continue to lead the company,
which provides high quality healthcare services in three key service
areas: Amarillo, Texas; Tulsa, Oklahoma; and Albuquerque, New Mexico.
The portfolio includes 14 hospitals and three multi-specialty physician
groups. Ardent will remain headquartered in Nashville with no expected
changes to its current operations. Ardent currently generates
approximately $2 billion in annual net revenues.
Advisors
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. McDermott,
Will & Emery LLP is serving as legal advisor to EGI. Katten Muchin
Rosenman LLP is serving as legal advisor to Ardent management. Bank of
America Merrill Lynch, which is the current lender to Ardent Health
Services, is providing financing to Ardent in the transaction and is
serving as EGI's exclusive financial advisor.
About Ventas
Ventas, Inc., an S&P 500 company, is a leading real estate investment
trust. Its diverse portfolio of more than 1,600 assets in the United
States, Canada and the United Kingdom consists of seniors housing
communities, medical office buildings, skilled nursing facilities,
hospitals and other properties. Through its Lillibridge subsidiary,
Ventas provides management, leasing, marketing, facility development and
advisory services to highly rated hospitals and health systems
throughout the United States. More information about Ventas and
Lillibridge can be found at www.ventasreit.com
and www.lillibridge.com.
About Equity Group Investments
Equity Group Investments, the private firm founded by Sam Zell over 45
years ago, specializes in opportunistic investments across the debt and
equity markets. EGI has extensive experience in energy, industrial,
manufacturing, logistics and transportation, business services,
communications, healthcare and real estate.
About Ardent Health Services
Ardent Heath Services invests in quality health care. In people,
technology, facilities and communities, Ardent makes considerable
investments, producing high-quality care and extraordinary results.
Based in Nashville, Tenn., Ardent's subsidiaries own and operate acute
care health systems in three service areas - Amarillo, Texas; Tulsa,
Okla. and Albuquerque, N.M. - that include 14 hospitals and three
multi-specialty physician groups. For more information, go to www.ardenthealth.com.
This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements include, but are not limited to, statements regarding the
expected timing of the completion of the proposed transaction, the
benefits of the proposed transaction, including future financial and
operating results, statements regarding plans, objectives, expectations
relating to the proposed transaction and other statements that are not
historical facts. All statements regarding Ventas, Inc. (the "Company")
or its tenants', operators', borrowers' or managers' expected future
financial condition, results of operations, cash flows, funds from
operations, dividends and dividend plans, financing opportunities and
plans, capital markets transactions, business strategy, budgets,
projected costs, operating metrics, capital expenditures, competitive
positions, acquisitions, investment opportunities, dispositions,
acquisition integration, growth opportunities, expected lease income,
continued qualification as a real estate investment trust ("REIT"),
plans and objectives of management for future operations and statements
that include words such as "anticipate," "if," "believe," "plan,"
"estimate," "expect," "intend," "may," "could," "should," "will" and
other similar expressions are forward-looking statements. These
forward-looking statements are inherently uncertain, and actual results
may differ from the Company's expectations. The Company does not
undertake a duty to update these forward-looking statements, which speak
only as of the date on which they are made.
The Company's actual future results and trends may differ materially
from expectations depending on a variety of factors discussed in the
Company's filings with the Commission. These factors include
without limitation:
(a) the inability to complete the acquisition of AHS and the
separation and sale of AHS's hospital operations on terms acceptable to
the Company or at all; (b) the failure to satisfy any conditions to
completion of the transaction on terms acceptable to the Company or at
all; (c) the occurrence of any event, change or other circumstances that
could give rise to the termination of the purchase agreement or any
other agreement relating to the transaction; (d) the risk that the
expected benefits of the transaction, including financial results, may
not be fully realized or may take longer to realize than expected; (e)
risks related to disruption of management's attention from ongoing
business operations due to the proposed transaction; (f) the effect of
the announcement of the proposed transaction on the Company's or AHS's
relationships with their respective customers, tenants, lenders,
operating results and businesses generally; (g) the ability and
willingness of the Company's tenants, operators, borrowers, managers and
other third parties to satisfy their obligations under their respective
contractual arrangements with the Company, including, in some cases,
their obligations to indemnify, defend and hold harmless the Company
from and against various claims, litigation and liabilities; (h) the
ability of the Company's tenants, operators, borrowers and managers to
maintain the financial strength and liquidity necessary to satisfy their
respective obligations and liabilities to third parties, including
without limitation obligations under their existing credit facilities
and other indebtedness; (i) the Company's success in implementing its
business strategy and the Company's ability to identify, underwrite,
finance, consummate and integrate diversifying acquisitions and
investments, including investments in different asset types and outside
the United States; (j) macroeconomic conditions such as a disruption of
or lack of access to the capital markets, changes in the debt rating on
U.S. government securities, default or delay in payment by the United
States of its obligations, and changes in the federal or state budgets
resulting in the reduction or nonpayment of Medicare or Medicaid
reimbursement rates; (k) the nature and extent of future competition,
including new construction in the markets in which the Company's seniors
housing communities and medical office buildings ("MOBs") are located;
(l) the extent of future or pending healthcare reform and regulation,
including cost containment measures and changes in reimbursement
policies, procedures and rates; (m) increases in the Company's borrowing
costs as a result of changes in interest rates and other factors; (n)
the ability of the Company's operators and managers, as applicable, to
comply with laws, rules and regulations in the operation of the
Company's properties, to deliver high-quality services, to attract and
retain qualified personnel and to attract residents and patients; (o)
changes in general economic conditions or economic conditions in the
markets in which the Company may, from time to time, compete, and the
effect of those changes on the Company's revenues, earnings and capital
sources; (p) the Company's ability to pay down, refinance, restructure
or extend its indebtedness as it becomes due; (q) the Company's ability
and willingness to maintain its qualification as a REIT in light of
economic, market, legal, tax and other considerations; (r) final
determination of the Company's taxable net income for the year ended
December 31, 2014 and for the year ending December 31, 2015; (s) the
ability and willingness of the Company's tenants to renew their leases
with the Company upon expiration of the leases, the Company's ability to
reposition its properties on the same or better terms in the event of
nonrenewal or in the event the Company exercises its right to replace an
existing tenant, and obligations, including indemnification obligations,
the Company may incur in connection with the replacement of an existing
tenant; (t) risks associated with the Company's senior living operating
portfolio, such as factors that can cause volatility in the Company's
operating income and earnings generated by those properties, including
without limitation national and regional economic conditions, costs of
food, materials, energy, labor and services, employee benefit costs,
insurance costs and professional and general liability claims, and the
timely delivery of accurate property-level financial results for those
properties; (u) changes in exchange rates for any foreign currency in
which the Company may, from time to time, conduct business; (v)
year-over-year changes in the Consumer Price Index or the UK Retail
Price Index and the effect of those changes on the rent escalators
contained in the Company's leases and the Company's earnings; (w) the
Company's ability and the ability of its tenants, operators, borrowers
and managers to obtain and maintain adequate property, liability and
other insurance from reputable, financially stable providers; (x) the
impact of increased operating costs and uninsured professional liability
claims on the Company's liquidity, financial condition and results of
operations or that of the Company's tenants, operators, borrowers and
managers, and the ability of the Company and the Company's tenants,
operators, borrowers and managers to accurately estimate the magnitude
of those claims; (y) risks associated with the Company's MOB portfolio
and operations, including the Company's ability to successfully design,
develop and manage MOBs, to accurately estimate its costs in fixed
fee-for-service projects and to retain key personnel; (z) the ability of
the hospitals on or near whose campuses the Company's MOBs are located
and their affiliated health systems to remain competitive and
financially viable and to attract physicians and physician groups; (aa)
the Company's ability to build, maintain and expand its relationships
with existing and prospective hospital and health system clients; (ab)
risks associated with the Company's investments in joint ventures and
unconsolidated entities, including its lack of sole decision-making
authority and its reliance on its joint venture partners' financial
condition; (ac) the impact of market or issuer events on the liquidity
or value of the Company's investments in marketable securities; (ad)
merger and acquisition activity in the seniors housing and healthcare
industries resulting in a change of control of, or a competitor's
investment in, one or more of the Company's tenants, operators,
borrowers or managers or significant changes in the senior management of
the Company's tenants, operators, borrowers or managers; (ae) the impact
of litigation or any financial, accounting, legal or regulatory issues
that may affect the Company or its tenants, operators, borrowers or
managers; (af) changes in accounting principles, or their application or
interpretation, and the Company's ability to make estimates and the
assumptions underlying the estimates, which could have an effect on the
Company's earnings; and (ag) uncertainties as to the completion and
timing of the Company's proposed spin-off transaction, and the impact of
the spin-off transaction on the Company's business. Many of these
factors are beyond the control of the Company and its management.
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