Kindred Healthcare (NYSE: KND) and Ventas (NYSE: VTR) have agreed on a plan that allows Kindred to exit the skilled nursing business, or at least mostly. Of the 90 or so SNFs that Kindred still operates, Ventas owns 36 of them and leases them to Kindred. The two companies have agreed that Kindred can purchase the 36 properties for $700 million (current rent is $49 million), or renew the current lease on all unpurchased SNFs through 2015 at the current rent level. If they all get purchased (and then re-sold at different prices) for $700 million, that would come to $160,000 per bed, which strikes us as above market for the Kindred SNFs. Most likely, the price represents a premium that KND must pay for Ventas to let it out of the leases. We find it difficult to believe that they will achieve this average price in the open market, but they would already know that. To put that $700 million potential price in perspective, the 26 SNFs with 3,503 beds that Kindred currently owns with plans to sell would be worth $560 million using the $160,000 per bed number, or just below the full market cap of $600 million of Kindred. Hmmm.
Schedule a demo
Gain access to the best healthcare and long-term care investment intelligence, data, and analysis.
