Genesis HealthCare To Acquire Sun Healthcare

June 21, 2012

June 21, 2012. It was announced late yesterday that privately owned Genesis HealthCare signed an agreement to acquire Sun Healthcare Group for $8.50 per share, representing a 38% premium to the closing price before the announcement and a price that has not been seen since early last summer. The two companies are very similar in size but have some obvious locational differences despite the overlap in New England. In addition, Sun leases all of its properties, and Genesis leases most of its properties. The deal value, net of Sun's cash and inclusive of assumed debt, is close to $265 million. The winners in this transaction are obviously Sun's shareholders, but also Sabra Health Care REIT, which owns the majority of Sun's properties. Sabra will be strengthened by having its major tenant a part of a larger and stronger combined entity. With more than $4 billion in revenues and more than 400 properties, the combined Sun and Genesis will become the largest skilled nursing operator in the country. The big question is, Is that a good thing and what is the optimum size to compete in the changing post-acute arena? Stay tuned.

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