The shareholders of SNH wish they had the performance of VTR. VTR could acquire SNH in an accretive transaction after which VTR's better management team could expand on that accretion through the removal of the Portnoy RMR fees and expenses.
Not only would it be accretive, but it would further strengthen VTR's focus on private pay AL/IL and expand its lead in the consolidation of the senior housing sector.
SNH insiders, including Portnoy, do not own enough stock to block a deal. They hope that their bylaws would accomplish that, but I would think that a Judge would look at the SNH bylaws as over-reaching and as ones that favor Portnoy and RMR to the detriment of shareholders. Judges and the SEC don't tend to like that one-sided treatment.
FVE, at that point, could be sold to SRZ or another company that wants to expand their private pay AL/IL focus. FVE trades at a significant discount to book, has great owned assets, and an EBITDA multiple over 50% lower than their peers, given the Mackey discount.
A buyer of FVE could also cut out significant RMR fees and likely expand margins considerably. Mackey (CEO) has focused on growing revenues rather than on enhancing operations. They have some of the lowest occupancy rates in the sector notwithstanding some terrific properties. Time to focus on operations, occupancy, and ADRs, and expand margins.
Again, management does not own enough to prevent a deal.
The management of both companies have stocks that are too low, and they are both vulnerable.
This transaction moves the needle for VTR and gets the public consolidation reinvigorated.
SNH is now even more accretive based on the relative valuations of SNH & VTR. It is also large enough to move the needle for VTR. Combine that with the focus on private pay, and it looks interesting. However, it requires VTR to probably make a public bear hug bid for SNH given the RMR structure. Nonetheless, RMR owns very little of SNH and would be unable to stop a transaction that benefitted shareholders.
SNH is nearly exclusively private pay, so the government concern is not an issue. They would have an ability to leverage existing areas in the SE and NE. However, the tremendous accretion based on the relative CAP rates is the primary focus of the potential deal.
SNH is concentrated in the Northeast,South and Southeast-not sure if VTR would be interested in increasing their numbers in these areas.I think right now VTR is looking to increase their MOB's. Right now that is at 15% of their portfolio and they provide steady income with little government involvement.