Activist Shareholder Pushes Brookdale to Deliver on Rumored Deal

An activist shareholder in Brookdale Senior Living (NYSE: BKD) is trying to ratchet up pressure on the company’s leaders, urging them in an open letter to successfully negotiate a partial or complete sale of the company—or face the music from shareholders.

Rumors of a brewing Brookdale takeout surfaced on Tues., Jan. 10, when the Wall Street Journal reported that the nation’s largest senior living company in early talks with private equity giant Blackstone Group. Blackstone may be interested in acquiring Brookdale in its entirety or buying some or all of its owned real estate, according to the WSJ.

The rumors came less than a month after investment management firm Land and Buildings, a Brookdale shareholder, publicly advocated for the Brentwood, Tennessee-based senior living company to sell its owned real estate to unlock shareholder value. At that time, BKD shares were priced at $12.72, down from about $38.50 in April 2015. The company’s real estate is worth more than $21 per share, according to calculations made by Land and Buildings in December.

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Land and Buildings is “encouraged” by reports of the Blackstone negotiations, the firm’s founder and CIO Jonathan Litt wrote in a letter released Friday. The firm’s fear is that Brookdale leaders, satisfied with the bump in share price that has occurred since the deal rumor began to spread, will fail to push through a transaction.

“We believe shareholders, ourselves included, would be extremely disappointed and would hold the Brookdale Board accountable if the strategic alternatives process is not fully explored and fails to result in a successful conclusion,” Litt wrote. “We, and in our opinion other shareholders will stand with us, refuse to accept any half steps taken by this Board instead of the clear transparent action required to maximize shareholder value.”

The letter also reaffirmed Land and Buildings’ belief that BKD’s real estate is worth at least $21 per share, and the company as a whole has a net asset value of at least $25 per share. Analysts have offered slightly lower valuations for the real estate and entire enterprise.

After making big gains and topping $16 earlier in the week, Brookdale shares were down slightly on Friday, Jan. 13, ending the day at $15.81.

Written by Tim Mullaney

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