QCP Hints at Better Offer in Welltower-ProMedica Deal Wrinkle

Quality Care Properties (NYSE: QCP) may have found a more attractive suitor than its current potential buyers.

The Bethesda, Md.-based real estate investment trust (REIT) on Tuesday announced that it had received a potentially better takeover offer than the one currently on the table from fellow REIT Welltower Inc. (NYSE: WELL) and non-profit hospital system ProMedica.

Under the terms of the nearly $2 billion deal, QCP could entertain other offers during a “go-shop” period that concluded last Friday. Goldman Sachs, the REIT’s financial advisor, contacted 34 potential alternate buyers during that time, including other REITs and non-profit health care providers. The process eventually yielded a single firm offer, QCP said.

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“After consulting with its financial and legal advisors, QCP’s board determined that the acquisition proposal could reasonably be expected to lead to a superior offer,” the REIT said in a statement.

That means that QCP can continue to pursue this opportunity even though the “go-shop” period has given way to a “no-shop” restriction. The REIT would still have to pay Welltower a $20 million fee should it terminate the existing deal in favor of the offer entered during the go-shop period; were it to ditch Welltower and ProMedica to pursue any other offer, that fee would balloon to $60 million.

Despite the announcement, QCP was careful to note that its board of directors has not yet fully reviewed the offer, and that the mystery bidder would still need to secure debt financing in order to mount a more formal challenge.

In addition, QCP’s board still recommends that shareholders approve the Welltower merger deal at an upcoming proxy vote.

“There can be no assurance that the acquisition proposal will ultimately result in a superior offer, and discussions and negotiations with the potential bidder could terminate at any time,” QCP cautioned in its statement.

Should QCP eventually determine that the new offer is indeed superior — defined as an outcome that’s more beneficial for QCP’s shareholders — Welltower would have four days to match the offer.

The current deal structure would see Welltower and ProMedica team up to purchase QCP’s real estate in a joint venture, while the hospital chain concurrently buys skilled nursing operator HCR ManorCare — QCP’s primary tenant. QCP had initially explored the possibility of buying out ManorCare, which filed for Chapter 11 bankruptcy protection earlier this year, and relinquishing its status as a publicly traded REIT.

But back when the parties first announced the mega-deal, QCP CEO Mark Ordan framed the Welltower option as the best bet in a sea of difficult options.

“We believe that ProMedica and Welltower are very well-positioned acquirers, and they will not face the same risks and constraints that we would face in managing our assets,” Ordan said.

ProMedica echoed that sentiment on Tuesday.

“We are aware that Quality Care Properties, Inc. (QCP) has received another offer,” ProMedica public relations manager Tausha Moore told Skilled Nursing News via e-mail. “We think the Welltower/ProMedica joint offer is competitive and would provide the greatest value to QCP’s shareholders.”

Welltower did not have anything to add beyond what QCP said in its press release, Welltower senior vice president of legal Mary Ellen Pisanell told SNN.

A message to QCP was not returned as of press time.

Welltower stock finished Tuesday’s trading flat — rising a penny per share to $58.31 — while QCP shares rose 2.45% or $0.52, closing at $21.74 per share.

Written by Alex Spanko

Mary Kate Nelson contributed reporting.

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