Ventas to Buy Ardent for $1.75 Billion -- Update

By Angela Chen 

Ventas Inc. on Monday agreed to buy hospital operator Ardent Medical Services, Inc. for $1.75 billion in cash, and said it would spin off its skilled nursing facilities into an independent real-estate investment trust.

Ventas, based in Chicago, is one of the biggest U.S. health care REITs and operates senior-living communities, hospitals and medical office buildings.

Nashville-based Ardent is one of the 10 largest for-profit hospitals in the U.S. and generates about $2 billion in annual revenue. Ventas will now own 10 hospitals and real estate operated by Ardent under various names in Texas, Oklahoma and New Mexico.

Ardent will be entitled to distribute up to $75 million in excess cash to its shareholders.

"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 Chief Executive Debra Cafaro said. The addition helps diversifies Ventas' hospital real estate by property type and operator, she said. The company plans to participate in Ardent's future hospital acquisitions.

When the deal closes, Ventas will separate Ardent's hospital operations from its real estate. It will sell these hospital operations to a new entity owned by Ardent, in which Ventas has a 9.9% stake. The two will enter a long-term lease.

The transaction is expected to add to Ventas' funds from operations by 8 to 10 cents in the first full year after close.

The REIT spinoff will comprise 355 skilled nursing facilities and other health care assets operated by 44 regional and local care providers. The average lease doesn't expire for 10 years and the portfolio includes facilities in 37 states. It is expected to generate funds from operations of $240 to $245 million in its first full year.

Ventas President Raymond Lewis will be the spinoff's CEO. He said the separation will allow for "significant consolidation opportunities." Under the terms, Ventas shareholders will receive one common share of the spinoff for every four shares they currently own.

The Ardent deal is expected to close midyear, and the spinoff is expected to close in the second half of 2015.

Shares of Ventas were up about 2% in light premarket trading. The stock is up around 2% this year through Thursday's close.

Write to Angela Chen at [e-mail]

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