Seniors Housing Weekly Update: Advocat Still A No While Sun Healthcare Says Yes
June 26, 2012
Advocat Still A No While Sun Healthcare Says Yes
It has been nearly two months since Covington Investments made its unsolicited offer, at a nearly 100% premium, to buy all the shares of Advocat in a deal valuing the equity at $50 million. The offer has been rejected with little discussion. Since then, however, Sun Healthcare agreed to be purchased by Genesis HealthCare in a deal valued at $275 million that came with a 38% premium to Sun’s share price. Sun leases all its properties, and Advocat leases most of its properties. And while the similarities pretty much stop there, we wonder what the board at Advocat sees for the future of a smallish skilled nursing operator that the board of Sun Healthcare did not see for what is a much larger company. The owners of Genesis obviously see a future where real estate ownership matters less than a solid operating platform, and the importance of being the low-cost, high-quality producer in an environment that will need to be driving overall health care costs down. That $8.50 a share offer is still looking pretty good.