When the news first broke several days ago that an investor had offered to buy Diversicare Healthcare Services for $10.10 per share when it was trading below $3.00, well, we said it was an offer that would be hard to turn down. The board did not, and it appears to be a nice windfall for shareholders. But, the due diligence has to pan out, and it is always an out to find a reason for a lower price. We still are not sure why they offered such a high price in this market, and such a generous premium.
The buyer is DAC Acquisition LLC, run by Ephram “Mordy” Lahasky. The price represents a very healthy premium of 256% over the closing price of $2.84 on August 19. The merger agreement includes a “go-shop” period for 35 days whereby management can solicit and receive alternative offers. It is doubtful they will see any.
A quick search of the buyer does reveal some problems during the pandemic with a few nursing they are affiliated with, including some investigations and a very high death toll at a Pennsylvania nursing home. It is just too difficult to determine what they really mean, especially with some regulatory authorities really going after some providers for “alleged” quality of care issues, when in some cases it was really bad luck in a facility or two early on when no one understood the nature of the pandemic.
It is difficult to determine purchase price multiples flor the transaction since the company has been receiving federal aid through the provider relief fund. There may be more clarity when they release their proxy statement, however. Brentwood Capital Advisors represented Diversicare and Bass Berry & Sims was their legal counsel. Diversicare operates 61 nursing facilities with about 7,250 beds.
