Seniors Housing Weekly Update - Sun Sets on Sun Healthcare
December 4, 2012
Sun Sets on Sun Healthcare
Another act in the consolidation play is finally over, as Genesis HealthCare has closed on its purchase of Sun Healthcare Group for $8.50 per share. The majority of Sun’s properties are owned by Sabra Health Care REIT, with the remainder owned by a handful of other REITs, so Genesis is really buying the operating business of Sun. The purchase price was about $270 million, and Genesis will be getting a company with $1.84 billion in revenues and $85 million of annual EBITDA based on the third quarter. Close to 22% of Sun’s revenues come from ancillary services, such as hospice care, a therapy company and a staffing business. Now the hard part comes, as Genesis will have to integrate Sun’s operations into its own, and the new geographic coverage will more than double the company’s existing footprint. The play, we believe, is to use its enhanced size in what should be a post-acute sector with growing importance moving forward. That is assuming, of course, that we can move forward, something that is certainly not a given in our nation’s capital today.