Ensign Group Completes Spinoff of Non-Skilled Nursing Business Lines

The Ensign Group (Nasdaq: ENSG) on Tuesday announced the successful completion of a plan to spin off all of its non-skilled nursing business lines into a separate company, The Pennant Group (Nasdaq: PNTG).

The San Juan Capistrano, Calif.-based post-acute company’s board approved the plan at the end of August, nearly four months after it was first announced in early May.

Ensign will continue to operate its group of more than 200 skilled nursing facilities, while Pennant will focus on Ensign’s former home health, hospice, and senior living businesses.

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“We are thrilled to complete the spinoff of Pennant and couldn’t be more optimistic about their future and the future of Ensign,” executive chairman Christopher Christensen said in a statement announcing the completed spinoff.

The deal marks the second such spinoff in five years for the company: Back in 2014, Ensign spun its real estate assets into CareTrust REIT (Nasdaq: CTRE). As a standalone operating platform, Ensign has rapidly acquired real estate in its own right, currently controlling 82 assets — including 29 senior living facilities that it will lease to Pennant.

For comparison, the company owned 94 assets at the time of the CareTrust deal.

“We will continue to watch the growing underlying value in our owned real estate and other new business ventures, and are excited about the additional potential opportunities that each of those businesses gives us in the future,” CEO Barry Port said.

Ensign investors received a single share of Pennant stock for every two Ensign shares held as of September 20.

The skilled nursing operator initially engineered the deal as a way to enhance the value of its non-SNF senior housing and care businesses, which executives said may have been artificially depressed due to general market skittishness about institutional post-acute and long-term care.

“More education about and visibility into these uniquely situated operations will create a better understanding of the value we believe remains somewhat hidden and overshadowed by the market’s perception of the skilled nursing industry at large, despite Ensign’s successful history of outperforming industry peers in many key metrics,” Daniel Walker — now the chairman, CEO, and president of Pennant — wrote in a May letter to shareholders.

The now-split companies will continue to maintain a relationship under the “Ensign Pennant Care Continuum,” or EPCC.

“The EPCC memorializes the relationship Ensign and Pennant independent operating subsidiaries have historically had by providing those that opt in a framework to share data and create care pathways that will help us achieve the highest possible outcomes in transitions between care settings,” Walker said in the Tuesday statement.

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