Creates Growth Platform in Attractive U.S. Hospital Real Estate Market
Ventas to Retain Owned Real Estate and Separate Operations into
Company Led by Ardent Management Team
CHICAGO--(BUSINESS WIRE)--Apr. 6, 2015--
Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) announced today
that it has signed a definitive agreement to acquire privately-owned
Ardent Medical Services, Inc. (with its affiliates “Ardent Health
Services”), a premier provider of health care services and one of the
ten largest for-profit hospital companies in the U.S., for $1.75 billion
in cash. Ardent Health Services will be entitled to distribute up to $75
million in excess cash to its existing shareholders. The transaction is
expected to be immediately accretive to Ventas’s normalized funds from
operations (“FFO”) per share by $0.08 to $0.10 in the first full year
after close.
Ardent Health Services is owned by private equity funds managed by Welsh,
Carson, Anderson & Stowe. Based in Nashville, Tennessee, Ardent Health
Services and its subsidiaries own and operate leading health systems in
major markets in the U.S. Ardent Health Services currently generates
approximately $2 billion in annual revenues with over 50 percent of its
revenue derived from commercial (private) payors.
Concurrent with the closing of the transaction, 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 (collectively, “Ardent”) owned by current management of Ardent
Health Services, other equity sources, and up to 9.9 percent owned by
Ventas. Ventas and Ardent will enter into pre-agreed long-term
triple-net leases with an expected going in cash yield exceeding 7
percent and annual escalators estimated at 2.5 percent. The EBITDARM to
rent coverage ratio for the purchased facilities is expected to be
approximately 2.9x in year one.
Ventas will own ten high-quality hospitals (and related real estate)
operated by Ardent under the names BSA Health System in Amarillo, Texas,
Hillcrest HealthCare System in Tulsa, Oklahoma and Lovelace Health
System in Albuquerque, New Mexico. These assets include acute care,
heart, rehab and women’s health hospitals, comprising approximately 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,” said Ventas Chairman and
Chief Executive Officer Debra A. Cafaro. “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. The transaction also increases our diversification by
property type and operator. We look forward to partnering with Ardent’s
seasoned management team as a best-in-class operator to grow its
business.”
David T. Vandewater, President and Chief Executive Officer of Ardent,
said, “We have built a leading U.S. hospital franchise, currently
focused on three key markets with incredible growth potential. The
current management team and Ardent employees are excited about this
agreement with Ventas and we look forward to expanding Ardent and
capitalizing on the significant growth opportunities we see in the
immense, highly fragmented U.S. hospital market. With this strong
capital and operating partnership, we can expand while continuing to
serve patients and our communities.”
Transaction Benefits
-
Accretive Transaction/Leverage Neutral. This transaction is
expected to be immediately accretive to Ventas’s normalized FFO per
share by $0.08 to $0.10 (cash) in the first full year after close on a
leverage neutral basis. Ventas’s going in cash unlevered yield on the
Company’s aggregate net investment is expected to exceed 7 percent.
Ventas will maintain its strong credit profile and balance sheet, and
there is no expected change to the Company’s credit rating or outlook.
-
Increases Ventas’s Presence in Attractive Industry. The $1
trillion U.S. hospital market (by revenues) is benefiting from
attractive dynamics, including an increase in U.S. hospital
expenditures, increasing emergency room visits and admissions, a
growing 65 and over population, and more than 10 million newly insured
individuals. With Ventas’s support, Ardent will be well positioned to
drive future consolidation opportunities in a highly fragmented
market. The Medicare Payment Advisory Commission (MedPAC) has
recommended a 3.25 percent increase in Medicare rates for acute-care
services for fiscal year 2016.
-
Provides Follow On Investment Opportunities. Ventas expects to
participate in Ardent’s future hospital acquisitions. Ardent has a
robust pipeline of attractive revenue-enhancing investment
opportunities in its portfolio, in addition to a visible external
growth pipeline.
-
Adds High-Quality Hospital Portfolio with >50 Percent Commercial
(Private) Payor Mix and Substantial Market Share. Ardent is a top
ten for-profit hospital operator in the U.S. with high-quality
hospital systems with strong payor and provider relationships and
substantial market share in three key markets. Over 50 percent of
Ardent’s revenue base is derived from private pay commercial payors.
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Ardent Will Continue to be Run by an Exceptional, Tenured
Management Team. Ardent’s best-in-class management team will
continue to lead the company, and its strong employee base will remain
in place. Ardent will remain headquartered in Nashville with no
expected changes to its current operations.
-
Enhances Diversification. The transaction enhances Ventas’s
rental revenue diversification by property type and operator. U.S.
acute care hospitals will represent approximately 6 percent of
Ventas’s pro forma net operating income (“NOI”).
-
Extends Proven Track Record of Fueling Operator Growth. Ventas
has a successful track record of identifying and growing scalable
operating platforms as evidenced by the dramatic growth of Lillibridge
Healthcare Services and Atria Senior Living since investment by
Ventas. The Ardent acquisition adds a best-in-class operator and will
expand Ventas’s industry leadership across healthcare segments.
Approvals, Timing and Funding
The transaction is subject to the satisfaction of certain specified
closing conditions, including receipt of regulatory approvals, and is
expected to close mid-year 2015.
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.
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. 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.
Conference Call Details
Separately today, Ventas announced that the Company’s Board of Directors
unanimously approved a plan to spin off most of its post-acute/skilled
nursing facility portfolio into an independent, publicly traded REIT.
Ventas will hold a conference call to discuss both transactions today at
8:30 a.m. Eastern Time. The dial-in number for the conference call is
(866) 953-6858 (or (617) 399-3482 for international callers). The
participant passcode is “Ventas.” The call will also be webcast live and
can be accessed at the Company’s website at www.ventasreit.com.
A replay of the call will be available at the Company’s website, or by
calling (888) 286-8010 (or (617) 801-6888 for international callers),
passcode 65539086, beginning at approximately 12:30 p.m. Eastern Time
and will remain for 29 days.
Additional information regarding the Ardent Health Services acquisition
can be found on the Company’s website under the “Investor Relations”
section.
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 Ardent Health Services
Ardent Health 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 markets – 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.
About Welsh, Carson, Anderson & Stowe
Welsh, Carson, Anderson & Stowe focuses its investment activity in two
target industries, information/business services and healthcare. Since
its founding in 1979, the Firm has organized 16 limited partnerships
with total capital of over $21 billion. The Firm is currently investing
an equity fund, Welsh, Carson, Anderson & Stowe XII, L.P., and has a
current portfolio of approximately 25 companies. WCAS’s strategy is to
partner with outstanding management teams and build value for the Firm's
investors through a combination of operational improvements, internal
growth initiatives and strategic acquisitions. See www.welshcarson.com
to learn more.
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 the Company’s 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
Ardent Health Services and the separation and sale of Ardent Health
Services' hospital operations on terms acceptable to Ventas or at all;
(b) the failure to satisfy any conditions to completion of the
transaction on terms acceptable to Ventas 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 Ventas’s or Ardent Health Services’
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; and (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. Many of these factors are beyond
the control of the Company and its management.
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Source: Ventas, Inc.
Ventas, Inc.
Lori B. Wittman
(877) 4-VENTAS