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Omega Healthcare to acquire MedEquities Realty Trust in $600M deal

Omega Healthcare Investors Inc. signed a definitive merger agreement to acquire all of the outstanding shares of MedEquities Realty Trust Inc. in a deal that places its enterprise value at about $600 million.

The boards of directors of the two healthcare real estate investment trusts unanimously approved the merger, which will increase the value of Omega's nonskilled nursing assets by $296 million. This includes $75 million invested in a hospital facility leased to a subsidiary of Baylor Scott & White Health LLC.

The transaction will be executed with MedEquities stockholders receiving a fixed exchange ratio of 0.235 of an Omega common share and $2.00 in cash for each share of common stock they hold. The consideration represents a value of $10.26 per MedEquities share, based on the $35.15 closing price for Omega common stock Dec. 31, 2018.

Additionally, MedEquities will pay a special cash dividend of 21 cents per share to its shareholders on record on the trading day immediately before the closing date of the merger.

Pursuant to the deal, Omega projects accretion of annual funds from operations, adjusted FFO and funds available for distribution of approximately 5 cents per Omega share. Omega added that the merger will bring nine new operators to its portfolio.

The deal also includes Omega's acquisition of approximately $34 million in mortgage loans, as well as the fee simple interest in 34 facilities operated by 11 operators in seven states.

No changes are planned to the board of Omega or its executive officers with regard to the purchase of the Nashville, Tenn.-based REIT, Omega said in a release.

The merger is slated to wrap up in the first half of 2019, pending the satisfaction of customary closing conditions, including the approval of the stockholders of MedEquities. It is not subject to the consent of Omega's stockholders or any financing contingency.

If MedEquities terminates the merger agreement because it enters into superior deal, it will be required to pay Omega a termination fee of $6.5 million, plus a reimbursement of up to $1.5 million on or before 30 days after the merger agreement, subject to extension, or a termination fee of $12.3 million for any termination after that period.

Omega tapped Bryan Cave Leighton Paisner LLP to serve as its legal adviser. MedEquities enlisted Morrison & Foerster LLP to be its legal adviser and Citigroup Global Markets Inc. to be its exclusive financial adviser.