The SeniorCare Investor: Assisted Living Concepts For Sale Again -
In Round 2, The Bankers Try Again To Get A Deal Done
We have all heard about the gift that keeps on giving, and since we are in the Holiday Season with a lot of gift-giving going on, it just seemed to be an appropriate analogy. A few years ago, it was the slow death of Sunwest Management and then its prolonged sale that was, from an editorial perspective, the gift that kept on giving, even though readers may have grown tired of it. You have to admit, however, that Sunwest had a tremendous impact on the acquisition market, both on the way up as it overpaid and out-bid many competitors as well as on the way down as its distressed portfolio was dismembered in large and small pieces, heavily contributing to falling acquisition prices and a negative mood in the market.
For the past two years, Sunwest has been replaced by Assisted Living Concepts (NYSE: ALC) for much editorial fodder, but not in the same way since ALC was really not active in the acquisition market. It was just the management strategy that seemed so unrealistic, as well as investors and analysts gushing about the improving margins and cash flow as the former CEO took occupancy down to 60% and then couldn’t get it to move up by even a percentage point with the much-desired private pay resident, even with some alleged games played with whose heads were counted as being in some beds for certain covenant purposes. But we digress.
Last month we reported that ALC’s share price jumped 20% when the company disclosed that a Special Committee of the Board would continue its strategic review process to enhance shareholder value. Since management also announced that it was already receiving indications of interest from buyers for its seven owned properties in New Jersey, one could have interpreted the “review process” as just that, a review of each property or each state to determine whether there was a long-term strategic fit. While that may have been the case, apparently the Board has still not taken its eye off the big picture, which is a sale of the entire company, or what’s left of it As we know from last winter’s failed attempt to sell the company, and at a much higher price, the Board does like to keep things quiet, since no one really knew what was happening (other than you subscribers). That first process came to an end when Ventas (NYSE: VTR) rightfully threw a hissy fit about a small leased portfolio with ALC because of some embarrassing quality of care issues as well as other “allegations.” As you know, ALC was essentially forced to buy back those properties at an above-market price (to say the least) and at a cap rate more appropriate for large, new “A” quality assets. No one has ever accused VTR of being dumb, and this was a very smart move. All of this led to the firing of the former CEO, Laurie Bebo, and the rest, as they say, is history (more on her a little later). But we believe the entire episode has softened the attitude of the B shareholders, who with just 13% of the total shares have more than 50% of the voting power........Want to read more? Click here for a free trial to The SeniorCare Investor and download the current issue today