DHC - Diversified Healthcare Trust gains amid opposition to Office Properties deal

2023-05-23 10:49:22 ET

Diversified Healthcare Trust ( NASDAQ: DHC ) rose 9% after a shareholder said it intended to vote against the company's merger agreement with Office Properties Income Trust ( NASDAQ: OPI ). OPI gained 7%.

Investor Flat Footed LLC, which has a 7.4% stake in Diversified Healthcare ( DHC ), said the proposed merger with Office Properties ( OPI ) "dramatically undervalues DHC," the investor wrote in a letter to DHC's board on Tuesday.

"In sum, DHC is uniquely positioned to capitalize on the rapidly growing senior housing market, which has yet to be reflected in its share price," Flat Footed's Marc Andersen wrote in the letter."And there is no basis to dampen DHC’s prospects by burdening it with OPI’s dying commercial office portfolio and looming debt refinancings."

Flat Footed values DHC’s portfolio of assets at about $5 billion and believes the company’s stock should be trading between $9 and $10 a share.

Flat Footed argues that there are many "superior" alternatives to a merger with Office Properties ( OPI ) and that DHC could look to sell a small portion of its assets, and the company would be "well-positioned" to pay down its near-term notes.

Office Properties ( OPI ) agreed to acquire all of the outstanding common shares of DHC in an all-share transaction last month.

More on Diversified Health/Office Properties

• A Nightmare Deal Between Office Properties Income Trust And Diversified Healthcare Trust
• RMR Brings Diversified Healthcare And Office Properties Together
• Charlie Munger sounds warning on U.S. commercial property market

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