Brookdale's $4 billion acquisition on hold: report
Brookdale CEO Andy Smith said the company “continue[s] to improve our financial position with increased liquidity and by executing on our plan to refinance our near-term debt maturities.”
Brookdale Senior Living's talks to be acquired by Beijing-based Zhonghong Zhuoye Group Co. Ltd. have stalled because Chinese regulatory officials are more carefully scrutinizing overseas investments and financial institutions are taking a more conservative approach to assessing credit risks, the Financial Times reported Monday.
A Chinese bank put an onshore loan related to the transaction on hold because Zhonghong Group is considered “high risk,” a source told the media outlet. Regulators have approved an offshore loan from the same bank, the source said.
In June, Reuters reported that Brentwood, TN-based Brookdale was in negotiations to be acquired for $3 billion by the real estate development and holding company, citing “people familiar with the matter.” Financial Times sources valued the transaction at $4 billion, which the newspaper said would make it one of the biggest overseas purchases by a private Chinese firm to date in 2017.
A Brookdale spokeswoman told McKnight's Senior Living that the company does not comment on rumors or speculation.
Also Monday, Brookdale released its financial results for the second quarter in advance of an earnings call planned for Tuesday.
The company posted an earnings per share loss of $0.25 for the quarter, missing analysts' expectations by $0.02. Total revenue of $1.19 billion was down 5.6% year over year but beat analysts' expectations by $50 million.
Facility operating expenses were down 7.4% from the second quarter of 2016, and operating income for the consolidated senior housing portfolio decreased by 18.7% from the same quarter of last year.
Resident fees were $934.1 million in the second quarter, a decrease of 11.4% from the second quarter of the previous year. Brookdale said the decrease mainly was a result of the sale of assets and the termination of leases related to 130 communities (10,964 units) since the beginning of the prior-year period.
“During the second quarter, we continued to be challenged by a difficult macro environment, with a large number of new competitive openings across our markets,” Brookdale President and CEO Andy Smith said in a statement. “We are focused on defending our market position while putting the company in a better position for 2018.”
Smith said the company was pleased with its progress in improving market positioning through segmentation, maximizing revenue per available room through more sophisticated pricing tools, and enhanced employee training and development.
“We also continue to improve our financial position with increased liquidity and by executing on our plan to refinance our near-term debt maturities,” he said. Brookdale said its liquidity position increased by more than $100 million from the first quarter.