HCR ManorCare To Go Public?

June 10, 2011

June 10, 2011. According to some published reports, HCR ManorCare may be filing with the SEC for an IPO in the coming weeks, with an actual pricing late in the third quarter or the fourth quarter depending on market conditions.  When the real estate assets were sold to HCP, Inc. earlier this year, we had estimated....

2010 EBITDAR to be about $700 million, and the new annual lease payments would begin at $472.5 million, leaving about $225 million in extra cash flow for other debts as well as capital investments.  In addition, HCP received an option to buy a 9.9% interest for $95 million, which put a theoretical equity value at close to $1.0 billion.  The tricky part for an IPO, and the valuation, will be what happens to Medicare rates, but we assume they are thinking that CMS will have come to some conclusions by September, providing a certain degree of clarity (at least for a year). A significant decline in reimbursement will obviously send the valuation down, since HCR ManorCare has such a significant Medicare population.

If the IPO gets done with a strong valuation and good post-offering price movement, we would assume that Genesis HealthCare would also be taking a look at an IPO.       

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