Bloomberg News reports emerged Thursday indicating that Ventas, Inc. (NYSE: VTR) has entered a bid for General Electric Co.’s multi-billion dollar health care finance unit. Despite the report, sources with knowledge of the matter tell SHN Ventas is not moving forward in the bidding process.
It is company policy not to comment on speculation or rumors related to merger and acquisition activity, a Ventas spokesman told SHN.
But the report begs the question: Would a deal in which Ventas acquires some or all of GE Capital Healthcare better position the Big Three healthcare REIT? GE Capital Healthcare presents a platform valued between $10 billion and $11 billion and previously confirmed with SHN that the company’s Healthcare Financial Services business provided more than $10.5 billion in financing to customers, including in senior living, across more than 240 transactions in 2014. That was an increase of 20% percent from the prior year. But the company does not own any real estate holdings at present.
Bloomberg cites “people with knowledge of the the matter” regarding Ventas’ interest in the unit.
“Initial bids were due June 18, with the next round of offers due in early July, the people said,” Bloomberg reports. “GE is working with JPMorgan Chase & Co. on the sale and may select a buyer by the end of July, they said.”
Ventas is a Chicago-based REIT that serves as landlord to a number of the nation’s top operators across the senior housing, post-acute, medical office building (MOB) and hospital sectors, and maintains a diverse real estate portfolio that encompasses 1,632 owned properties in the U.S., Canada and the United Kingdom.
Apollo Global Management and Ares Management LP are among other bidders, according to Bloomberg.
Responding to the rumor of Ventas’ involvement, brokerage and investment banking firm Stifel says it assumes in a successful bid Ares and Ventas “would likely split up the unit with healthcare real estate loans going to Ventas.” The GE finance unit lends to more than just health care real estate, such as to medical device, pharmaceuticals, and biotech companies.
“On the surface buying GE healthcare lending business would seem like a strange transaction for Ventas, but Ventas has bought and sold loans before, and the healthcare lending unit would be a unique source of healthcare operator relationships and real estate management talent for Ventas and perhaps even for the company’s pending spin-off skilled nursing focused REIT,” Stifel says in a research note.
If Ventas did express interest in the unit, it may be a reflection of the REIT “temporarily looking to arbitrage the strength of its low cost balance sheet to find value in the health care real estate landscape outside of direct ownership,” Stifel says. “Holding a significant level of mortgages rather than directly owning real estate would not garner Ventas a higher valuation from investors, in our view, but there may be secondary or hidden benefits such as the real estate relationships that lead to future ownership and an influx of management talent.”
Capital One Financial Corp. has also placed a bid, Bloomberg reports. Capital One regularly provides financing for the senior housing space.
Written by Cassandra Dowell