Health Care Deal News: Spotlight on Long-Term Care- October 2012

As we mentioned, September nearly matched August in terms of the number of announced long-term care transactions, but all of them were under $100 million with the exception of the anticipated announcement by Health Care REIT (NYSE: HCN) regarding who would be the buyer of the Sunrise Senior Living (NYSE: SRZ) management business after HCN closes on the purchase of the entire company and the nearly $3 billion of real estate assets.  Of 19 sector transactions in September, 17 had disclosed prices, and the more noteworthy of these are in the table on pages 11 and 12.

Ever since Health Care REIT announced its acquisition of Sunrise Senior Living in late August, there has been a constant flurry of activity, announcements and moving parts.  We already reported on HCN’s progress in taking over full ownership of as many of the Sunrise joint venture assets as they could, the timing of which we have to assume was pre-planned as far back as early August.  In other words, they knew exactly what they were doing.  What did catch us by surprise was the announcement regarding the buyer of the Sunrise management business.  With all the talk about Mark Ordan and his management team being so important to the transaction, and HCN stating that the valuation of the management business was not going to be that high, we had figured that Mr. Ordan would partner with Goldman Sachs as his equity investor to buy the management company, since he had such strong ties to Goldman.  Wrong. 

When the trio of Kohlberg Kravis Roberts (KKR), Beecken Petty O’Keefe (BPOC) and Coastwood Senior Housing Partners (Dan Decker) lost the competitive bid for CCRC operator Erickson Retirement Communities a few years ago, and then went quiet on us, we had assumed they gave up on trying to make a major sector acquisition.  When Dan Decker then went on Health Care REIT’s board, it seemed like another nail in their joint venture coffin.  In a very hard to find release, just before the Sunrise deal was announced, HCN announced that Mr. Decker had resigned from its board to devote more time to his business interests with Coastwood.  Those interests now include teaming up again with KKR and Beecken Petty to buy the Sunrise management company when HCN closes on its acquisition of the entire entity early next year.  They are paying approximately $104 million for an 80% interest in what will be a new Sunrise management company, with Health Care REIT retaining a 20% interest for a $26 million investment.  The total “value” comes to $130 million.........Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today