BREAKING NEWS: Quality Care Properties has new suitor, puts Welltower merger in question

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Editor's Note: See this article for additional information on this news.

Quality Care Properties announced Tuesday morning that it is investigating an acquisition proposal that “could reasonably be expected to lead to a ‘superior offer' ” to the one announced in April with real estate investment trust Welltower.

QCP did not name the potential new bidder.

For now, the QCP board continues to recommend that stockholders vote to approve the company's merger with Welltower, the company said.

As part of the blockbuster deal announced in April, Welltower would acquire the assets of QCP for $20.75 per share while nonprofit health system ProMedica simultaneously would acquire QCP tenant HCR ManorCare, including assisted living and memory care communities as well as skilled nursing facilities, for approximately $1.35 billion. ManorCare would become a wholly owned indirect subsidiary of QCP.

A new 80/20 joint venture between Welltower and ProMedica would lease ManorCare's real estate to ProMedica for 15 years. ProMerica also would acquire ManorCare's operations.

The ManorCare real estate is located across 18 states and includes 160 post-acute communities and 58 assisted living communities, Shankh Mitra, senior vice president of investments at Welltower, said June 6 during a presentation at Nareit REITweek: 2018 Investor Conference. “The rough split of EBITDAR [earnings before interest, taxes, depreciation, amortization and restructuring or rent costs] is 70% post-acute and 30% senior housing,” he added.

Welltower, ProMedica and ManorCare all are based in Toledo, OH. QCP is based in Bethesda, MD.

QCP said Tuesday that the third-party acquisition proposal it received for the company came during a 45-day “go-shop” period during which, under the terms of the Welltower merger agreement, QCP was permitted to pursue other offers. That period ended June 9, QCP said.

During the go-shop period, QCP said, representatives of Goldman Sachs & Co. contacted 34 potential parties — “REITs, healthcare providers, operators and other strategic parties, financial sponsors and nonprofit health organizations” — on behalf of QCP to see whether they were interested in acquiring the company.

QCP said it subsequently entered into confidentiality agreements with five of the entities and provided information that led to the acquisition proposal from the potential bidder. “No other parties submitted an acquisition proposal to acquire the company during the go-shop period,” QCP said.

Under the terms of the merger agreement with Welltower, QCP is permitted to “continue to solicit proposals from, furnish nonpublic information to, and engage in further discussions and negotiations” with the unnamed potential bidder. Now that the go-shop period has ended, however, QCP cannot solicit alternative acquisition proposals from or provide confidential information to other third parties.

The potential bidder would need to obtain debt financing and undergo a due diligence review of QCP and HCR ManorCare as well as negotiate a definitive merger agreement before the parties could determine whether they wanted to proceed, QCP said.

“There can be no assurance that the acquisition proposal will ultimately result in a superior offer, and discussions and negotiations with the potential bidder could terminate at any time,” the company said.

Editor's Note: See this article for an update on this news.

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