06/28/2021 | by Sarah Borchersen-Keto

Ventas, Inc. (NYSE: VTR) and New Senior Investment Group Inc. (NYSE: SNR) said June 28 that they have agreed to merge, with Ventas acquiring New Senior in an all-stock transaction valued at approximately $2.3 billion, including $1.5 billion of debt.

Ventas Chairman and CEO Debra Cafaro said the deal expands the REIT’s position in senior housing “at an important inflection point in the cycle as the senior housing industry rebounds.”

Connor Siversky, analyst at Berenberg Capital Markets, said the transaction is “another bullish indicator of the perceived strength and velocity of the senior housing recovery.”

New Senior holds a geographically diversified portfolio of 103 private pay senior living communities, including 102 independent living communities, across 36 states.

J. Justin Hutchens, Ventas’s EVP for senior housing, said the independent living communities Ventas is acquiring “represent a strong fit with our existing portfolio, as we enhance our senior housing business to capture upside from the industry recovery.” Ventas points to a rapidly growing population of seniors, new construction at cyclical lows, and the ongoing recovery from COVID-19 as factors supporting the industry’s improvement.

Susan Givens, president and CEO of New Senior, said that combining with Ventas will provide all of the REIT’s stakeholders the opportunity to benefit from the “upside potential of a combined company that has enhanced size, scale, relationships, and financial strength.”

With pricing of the deal expected to show a 20%-30% discount versus replacement cost, “we believe this transaction implies the opportunity for Ventas to generate meaningful performance from an additional 12,404 units in the senior housing operation (SHOP) portfolio,” Siversky added.

Under the terms of the deal, New Senior shareholders will receive 0.1561 shares of newly issued Ventas stock per share of New Senior common stock. Based on the closing price of Ventas common stock on June 25, this represents approximately $9.10 per New Senior share, a 31% equity premium based on New Senior’s 30-day trading average.

The transaction is expected to close during the second half of 2021.