Ventas to Purchase New Senior Investment Group for $2.3B

Ventas, Inc. (VTR) has inked a deal to acquire New Senior Investment Group, Inc. (SNR) for $2.3 billion in an all-stock transaction that includes debt of $1.5 billion. The merger will strengthen Ventas’ position in the senior housing market, which is currently at its cyclical inflection point.

Shares of SNR soared 28.7% to close at $8.92 on June 28. SNR is a publicly-traded REIT with a high-quality, geographically diversified portfolio of 103 private-pay senior living communities. The group owns 12,404 units across 36 states in the United States.

Shares of Ventas, a real estate investment trust specializing in the ownership and management of healthcare facilities in the U.S., Canada, and the UK, have gained 58% over the past year. (See VTR stock chart on TipRanks)

New Senior shareholders will receive 0.1561 shares of newly issued Ventas stock for each New Senior share, according to the terms of the deal. This implies a valuation of $9.10 per New Senior share based on the closing price of Ventas shares on June 25. The deal price signifies a 31% premium, based on SNR’s 30-day average price and a 10% premium to its enterprise value.

The addition of New Senior’s portfolio will enhance Ventas’ size, scale, and financial strength. It will also add superior quality properties in markets with positive demand and supply fundamentals.

The deal is expected to be accretive to Ventas’ normalized funds from operations per share by approximately $0.09 to $0.11 on a full-year basis. Moreover, Ventas will realize annualized corporate G&A synergies in the range of $16 to $18 million from 2022 onwards.

Ventas CEO Debra A. Cafaro commented, “The transaction provides Ventas shareholders with an attractive valuation and accretion, and further positions us to win the recovery.”

The acquisition is expected to close during the second half of 2021, subject to regulatory approvals.

Following the acquisition announcement, Stifel Nicolaus analyst Steve Manaker reiterated a Hold rating on VTR and increased the price target from $54 to $57 (1.7% downside potential).

Overall, the stock has a Moderate Buy consensus rating based on 7 Buys, 4 Holds, and 1 Sell. The average analyst Ventas price target of $61.50 implies 6% upside potential from current levels.