Another Proxy Firm Gives Thumbs Up to Sabra-CCP Deal

A second proxy advisory firm has come out in favor of the impending merger of Sabra Health Care REIT, Inc. (NASDAQ: SBRA) and Care Capital Properties, Inc. (NYSE: CCP), bringing the current count to two in favor and one against.

Egan-Jones Ratings Company issued a report late Tuesday recommending that Sabra shareholders vote for the deal at the upcoming August 15 meeting, joining fellow advisory firm Glass, Lewis & Co. in giving the thumbs up.

“Given the track record of Sabra’s board and management and their knowledge and expertise in health care, we believe that they have fully evaluated the pros and cons of the transaction,” Egan-Jones stated in its report. “In our view, Sabra’s board and management continue to work on the realization of the company’s strategic plan of maximizing shareholder value in the long run.”

That assessment represents a rebuke of Independent Shareholder Services, which advised voters to reject the $7.4 billion deal, as well as a pair of activist shareholders — New York City-based hedge funds Eminence Capital and Hudson Bay Capital — that have announced their intentions to vote against the merger.

Those three parties have cited concerns about CCP’s high concentration of skilled nursing assets, claiming that the uncertainties facing the industry make increased SNF exposure an all-too-risky play: Should the deal go through as planned, SNFs would represent 73% of the combined firm’s total portfolio.

But Sabra CEO Rick Matros has repeatedly positioned the deal as a way to expand his real estate investment trust’s (REIT) footprint in the senior living industry as a whole, and expressed optimism about SNFs’ role in the care landscape going forward.

“Skilled nursing is a core part of the health care delivery system,” Matros said on Sabra’s quarterly earnings call last week. “It’s not going anywhere.”

He also claimed that the Irvine, Calif.-based REIT has been invited to discuss larger-scale deals in the wake of the merger announcement in May.

Egan-Jones appeared to agree with Matros’s assessment in its report.

“In our view, the diversification of portfolio resulting from the transaction will reduce the combined company’s exposure to industry and market risk, thereby providing it with competitive advantage in the SNF and senior housing [industries], and prospective investment opportunities,” the firm wrote.

“We believe that the Hudson Bay and Eminence’s arguments are focused on the short term benefits given that they became shareholders only after the announcement of the CCP transaction,” Egan-Jones continued.

Written by Alex Spanko

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