Jason Knapp
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Jason Knapp in Special Situation Investing News,

Hot off the Press, Big Special Situation News in the Senior Care Sector Could Lead to Big Gains

Interesting special situation news broke this morning when the healthcare REIT Ventas (VTR) announced that it is spinning off its Post-Acute/Skilled Nursing Facility Portfolio into a separate yet to be named company.

Ventas Announces Plan to Spin Off Post-Acute/Skilled Nursing Facility Portfolio

http://finance.yahoo.com/news/ventas-announces-plan-spin-off-103000921.html

I haven't analyzed what this means for Ventas as a company in great detail yet, but Mr. Market likes the news.  In an otherwise down day, VTR's stock is currently up over 3%.  My initial reaction is that it is a positive for Ventas, which should see its multiples grow both it and the SpinCo as they become more specialized and increase their combined dividend by 10% right off the bat.

More importantly, I view this news as being a major positive for the existing smaller REITs in the senior care sector. I currently own several of them, inclding CareTrust (CTRE),  AdCare (ADK) and New Senior Investment Group (SNR).  

 

Besides the fact that they were cheap and special situations in their own right these companies are now in play a potential acquisition targets for Ventas' new SpinCo, which is clearly looing to grow. Per today's press release:

"With a focus on the highly fragmented post-acute/SNF market, SpinCo will have the necessary size, balance sheet strength and access to capital to pursue significant consolidation opportunities."

CareTrust, the recent spinoff from high-quality senior care provider, The Ensign Group (ENSG) is much smaller than the upcoming Ventas spinoff, with 155 facilities, compared to an expected 355 at the SpinCo.  New Senior, the recent Newcastle Investment Corp. (NCT) spinoff is smaller still, with only 100 facilities.  They both should be easy for the new pure play to swallow, should it choose to.  AdCare, is the tiniest of all, with only 30 facilities.  ADK seems as though it has been positioning its portfolio to become a takeover target for months now.

Combine the massive tailwind that the senior care industry has considering the fact that the U.S. population of people 85 and older growing rapidly with a new player that's looking to grow and I think that CTRE, SNR and ADK's stocks have tremendous upside.

Jason