First it was a postponement of the shareholder vote for a week, and now the ill-fated merger between Diversified Healthcare Trust (DHC) and Office Properties Income Trust (OPI) has been terminated. Two vocal shareholders combined with the three proxy firms advising against the merger was enough to convince management to finally give up. For now.
Both parties to the merger have been struggling, and while management stated that this was the only way that DHC would be able to refinance its debt and get on a more solid financial footing to grow, the terms of the transaction seemed to penalize DHC shareholders too much at a time when its major operator was on the road to recovery, albeit more slowly than anyone wanted.
Given the overlapping management and ownership, we have to believe that they will try again, either with a better price for DHC shareholders, or a different structure. The looming debt maturity may be the tipping point on timing.
