Enterprising Investor
2 weeks ago
Regional Health Properties And Sunlink Health Systems To Merge In An All-Stock Transaction (1/06/25)
Enhances Opportunity to Increase Shareholder Value
Significantly Strengthens Balance Sheet
Expands Regional Board with the Addition of Two Highly Qualified Industry Veterans
Regional Health Properties, Inc. (“Regional”) (NYSE American: RHE) (NYSE American: RHE-PA) and SunLink Health Systems, Inc. (“SunLink”) (NYSE American: SSY) jointly announced today that they have entered into a definitive agreement and plan of merger (the “merger agreement”), pursuant to which SunLink will merge with and into Regional (the “merger”) in exchange for the issuance of an aggregate of 1,410,000 shares of Regional common stock and 1,410,000 shares of Regional’s newly-authorized Series D 8% Cumulative Convertible Redeemable Preferred Stock with a liquidation preference of $10 per share. The merger has been approved unanimously by each company’s board of directors and completion of the transaction is subject to the receipt of the approvals of the shareholders of both Regional and SunLink, regulatory approvals and satisfaction of customary closing conditions.
Brent S. Morrison, Regional’s Chairman and Chief Executive Officer, stated: “This merger will create a combined company with a stronger balance sheet and greater scale. In addition, by combining SunLink’s complementary assets with Regional’s platform of healthcare facilities, the combined company will be well-positioned for future growth.”
Robert M. Thornton, Jr., SunLink’s Chairman and Chief Executive Officer, stated: “SunLink has been seeking a merger partner that would benefit from our complementary pharmacy business, cash and balance sheet that has no debt. We believe the combination of SunLink with Regional, whose assets consist of established skilled nursing and senior living facilities offers, the opportunity for increased value to both the SunLink and Regional shareholders.”
Highlights
Regional has agreed to provide for each five (5) SunLink common shares (i) one share of Regional common stock and (ii) subject to adjustment pursuant to the terms and conditions of the merger agreement, one share of Series D 8% Cumulative Convertible Redeemable Participating Preferred Shares (“Regional Series D Preferred Stock”); other than SunLink dissenting shares and shares to be cancelled in accordance with the terms and conditions of the merger agreement. As a result of the transaction, SunLink shareholders will own approximately 43.0% of the combined company.
As of December 31, 2024, SunLink had approximately $17.6 million in total assets and no long-term debt.
Regional expects pre-tax cost synergies of approximately $1.0 million by the end of its fiscal 2026 and believes that additional operating synergies may be achievable upon completion of the merger and integration of the companies.
The board of the combined company will add two experienced industry veterans: C. Christian Winkle and Scott Kellman.
The transaction is expected to be completed in the spring of 2025, subject to the satisfaction of customary closing conditions.
The transaction has been unanimously approved by the boards of directors of both Regional and SunLink.
Summary of the Transaction
Consideration
Subject to the terms and conditions of the merger agreement, for each five shares of SunLink common stock (other than dissenting shares and shares to be cancelled in accordance with the terms and conditions of the merger agreement), Regional will issue (i) one share of Regional common stock and (ii) subject to adjustment pursuant to the terms and conditions of the merger agreement, one share of Regional Series D Preferred Stock. Based on the current number of shares of Regional common stock and SunLink common stock outstanding, Regional expects to issue approximately 1,410,000 shares of common stock as well as approximately 1,410,000 shares of Series D Preferred Stock to SunLink’s shareholders in the transaction. Each three shares of Regional Series D Preferred Stock are convertible into one shares of Regional common stock at the holder’s option and mandatorily by Regional if certain future conditions are met. As a result of the transaction, SunLink shareholders will own approximately 43.0% of the combined company. No fractional shares will be issued in the transaction. In addition, upon shareholder approval of the merger, SunLink may pay, subject to available cash and expected cash requirements for closing, a one-time, special dividend to its shareholders.
The Regional Series D Preferred Stock will be a new series of Regional preferred stock that will rank junior to the 12.5% Series B Cumulative Redeemable Preferred Shares of Regional. The Regional Series D Preferred Stock will have an initial liquidation preference of $10.00 per share and an initial dividend rate of 8% per annum, each subject to adjustment as set forth in the articles of amendment establishing the series. Beginning on July 1, 2027, holders of issued and outstanding Series D Preferred Stock shall be entitled to receive, when, as and if approved by the Regional board of directors out of funds of Regional legally available for the payment of distributions and declared by Regional, cumulative preferential dividends, subject to the terms and conditions of the articles of amendment establishing the series. Each three shares of Regional Series D Preferred Stock are convertible into one share of Regional common stock at the holders’ option and mandatorily if Regional meets certain future conditions.
Leadership, Corporate Governance and Headquarters
The combined company will be led by a proven management team that reflects the strengths and capabilities of both organizations. Upon closing of the transaction, Brent S. Morrison, CFA, President and Chief Executive Officer of Regional, will serve as President and Chief Executive Officer of the combined company and Robert M. Thornton, Jr., President and Chief Executive Officer of SunLink, will serve as Executive Vice President – Corporate Strategy of the combined company. Mark Stockslager, Chief Financial Officer of SunLink, will serve as Chief Financial Officer of the combined company.
Following closing of the transaction, the newly formed board of directors of the combined company will be chaired by Mr. Morrison and consist of at least six directors, including two existing Regional directors and two existing SunLink directors. In addition, C. Christian Winkle and Scott Kellman will join the board of the combined company once the merger is completed.
C. Christian Winkle was most recently the Chief Executive Officer of Sunrise Senior Living (“Sunrise”). Prior to Sunrise, Mr. Winkle was Chief Executive Officer of MedQuest and SavaSeniorCare/Mariner Health. Mr. Winkle currently serves as a board member of Beazer Homes (NYSE: BZH), a publicly traded homebuilder, Direct Supply, a private/employee owned supply chain/applied technology company, and RD Merrill, the owner of Merrill Gardens, the operator of 70 senior housing communities.
Scott Kellman formerly served as Chairman and Chief Executive Officer of American Eagle Lifecare Corporation, a not-for-profit provider of senior living services. Previously, he was the Chief Executive Officer of Care Investment Trust and a Managing Director and Head of Real Estate with CIT Healthcare. Mr. Kellman served as Senior Vice President at Healthcare Property Investors, Inc. where he was responsible for directing HCP’s business development activities. He also served as Senior Vice President, Treasurer of Tenet Healthcare Corporation (“Tenet”) where he managed Tenet’s real estate and oversaw its corporate finance and cash management functions. Mr. Kellman was Chief Operating Officer of Omega Healthcare Investors, Inc. where he acquired and provided debt financing for healthcare real estate properties.
The combined company will be headquartered in Atlanta, Georgia.
Approvals and Closing
The merger is expected to close in the spring of 2025, following receipt of the approvals of the shareholders of both Regional and SunLink, regulatory approvals and satisfaction of customary closing conditions. The transaction is not expected to trigger any change of control provision under Regional’s outstanding mortgages.
Advisors
Harpeth Capital, LLC is acting as financial advisor and Troutman Pepper Locke LLP is acting as legal advisor to Regional. Smith, Gambrell & Russell, LLP is acting as legal advisor to SunLink.
About Regional Health Properties
Regional Health Properties, Inc., headquartered in Atlanta, Georgia, is a self-managed healthcare real estate investment company that invests primarily in real estate purposed for senior living and long-term care. For more information, visit https://www.regionalhealthproperties.com.
About SunLink
SunLink, headquartered in Atlanta, Georgia, is the parent company of subsidiaries that own and operate Carmichael’s Cashway Pharmacy. For more information, visit https://www.sunlinkhealth.com.
https://www.globenewswire.com/news-release/2025/01/06/3004488/0/en/REGIONAL-HEALTH-PROPERTIES-AND-SUNLINK-HEALTH-SYSTEMS-TO-MERGE-IN-AN-ALL-STOCK-TRANSACTION.html
malp2009
8 years ago
Someone should explain the meaning of fiduciary to management and the board.
Today, 2/21/2017, SunLink closed at $1.69, 19 cents above the tender offer. On 2/14/2017 they issued their 10Q for the period ending 12/31/2016. The book value of the company as of 12/31/2016 is $2.72 per share, $1.22 above the tender offer. And we all know that with the possible future sale of the pharmacy business of about $10M to $12M, and all of the other buildings and property that the company owns since 2001, along with the licenses, the FMV of the company is far north of the $2.72 per share.
Note that this unfair unreasonable tender offer of $1.50 made by the Management Team and the Board of SunLink Healthcare Systems Inc has made this tendering very difficult for the non-affiliated shareholders. Meaning that, this gun to the head offer, take this offer or the affiliated shareholders are going private, underground, going dark, with non-tradable shares, is just plain wrong.
KOmani
8 years ago
Also note:
1,036,239 shares were tendered at $1.50
So, yes, shareholders equity declined $1,554,358.50
But shares outstanding declined 1,036,239
In other words, the adjusted shareholders equity is 24,109,641.50
(estimate)
While number of shares outstanding is now: 8,407,169
This give a book value of about $2.87
Management was greedy with it's $1.50 offer and now I will be even greedier in terms of what I want to tender my shares.
$2.25-$2.50 is more appropriate at this time and that may still leave quite a bit on the table.
I am ok to leave management with something, but offering $1.50 was an insult I couldn't support.
KOmani
8 years ago
The Annual Report was released on Friday.
On the report they have listed the August sold assets at $7.633 Million.
At this point, it's time to update the math in the intro ... as of June 30
Total Shareholders’ Equity was $19,489,000 (Compared with $20,759,000)
As there has been no dilution, the number of shares outstanding is 9,443,408.
Quick math suggested that the book value was $2.06 (Compared with previous $2.19)
The effect of the news is to increase the Shareholder's equity by approximately $7,000,000 (unchanged at this point.)
As such, the adjusted shareholders' equity is $26,489,000 (Compared with $27,759,000)
Again, no dilution, so the number of shares outstanding is still 9,443,408.
This suggests an Adjusted Book Value of $2.80/share (previously $2.94/share).
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