Aviv REIT Shares Jump On $3 Bln. Merger With Omega Healthcare

(RTTNews) - Shares of Aviv REIT Inc (AVIV) gained 14 percent on Friday after it agreed to be acquired by Omega Healthcare Investors Inc (OHI) in an all stock deal valued at $3 billion.

The deal creates a strong pure-play skilled nursing facility real estate investment trust, and will combine Omega's 562 nursing facilities and specialty hospitals with 63,532 beds and Aviv's 312 properties that accommodate 26,520 beds.

The deal is expected to close in the first quarter of 2015.

As per the terms of the deal, Aviv shareholders will receive a fixed exchange ratio of 0.90 Omega shares for each share of Aviv common stock they own.

Based on the closing stock price for Omega on October 30, this consideration would be equivalent to $34.97 of Omega stock for each Aviv share, representing a premium to Aviv shareholders of about 16.2 percent over Aviv's closing stock price on that day.

Upon closure, Omega shareholders are expected to own about 70 percent of the combined company and Aviv shareholders, together with the limited partners of Aviv Healthcare Properties Ltd Partnership, will own the rest.

Aviv, based in Chicago, Illinois, focuses on acquiring and developing skilled nursing facilities. The deal comes amid demand for senior-care facilities on one hand and the problem of lower Medicare insurance reimbursement rates.

The companies expect the deal to be accretive to adjusted funds from operations per share.

Taylor Pickett, chief executive officer of Omega, will head the combined company while Craig Bernfield, Aviv chairman and CEO, will join the board.

Omega will maintain its corporate headquarters in Hunt Valley, Maryland.

The combined companies expect to benefit from about $9 million of general and administrative cash savings and additional savings from reduced borrowing costs.

The nursing-home segment has seen some consolidation, a recent deal being the $720 million cash and stock merger between Kindred Healthcare Inc and Gentiva Health Services Inc.

Also Friday, Aviv REIT reported third-quarter profit net earnings to common stockholders of $9.7 million, compared with $7.6 million last year. Earnings per share were unchanged at $0.20.

Funds from operations for the quarter were $27.5 million, compared with $18.4 million last year.

Normalized FFO for the quarter rose to $28.7 million from $19.6 million a year ago.

Adjusted funds from operations, or AFFO, for the quarter increased to $28.8 million, or $0.47 per share from $21.8 million or $0.43 per share a year ago.

Analysts polled by Thomson Reuters expected FFO of $0.48 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the third quarter were $47.4 million, compared with $32.9 million in the prior year.

Analysts had a consensus revenue estimate of $47.3 million for the quarter.

For the full year, the company continues to expect AFFO of $1.89 to $1.93 per share, while analysts currently expect $1.75 per share.

AVIV is trading at $34.42, up $4.32 or 14.36%, on a volume of 2 million shares on the NYSE.

OHI is trading at $38.83, down $0.02 or 0.05%, on a volume of 3.4 million shares on the NYSE.