DHC - Diversified Healthcare Trust stock jumps after deal to merge with OPI

2023-04-11 06:36:16 ET

Diversified Healthcare Trust ( NASDAQ: DHC ) shares surged over 15% premarket on Tuesday after the real estate investment trust announced a definitive merger agreement with Office Properties Income Trust ( NASDAQ: OPI ).

Pursuant to the deal, OPI will acquire all of the outstanding common shares of DHC in an all-share transaction. DHC shareholders will receive 0.147 Shares of OPI common stock for each share of DHC stock, which represents an implied value of $1.70 per DHC common share.

The merger is expected to be immediately accretive to DHC shareholders on a pro rata basis, resulting in estimated annual general and administrative savings of ~$2M-$3M.

Subject to the approval of DHC and OPI shareholders and other customary closing conditions, the transaction is  expected to close during the third quarter of 2023.

Upon closing of the transaction, OPI, the surviving entity in the merger, plans to change its name to "Diversified Properties Trust."

The deal creates a diversified REIT with a broad portfolio, defensive tenant base and strong growth potential. The combined entity will be led by the OPI executive management team, will be managed by The RMR Group and will be headquartered in Newton, Massachusetts.

DHC's president and chief executive officer Jennifer Francis said, "The merger with OPI greatly benefits DHC both strategically and financially. Financially, the transaction immediately reduces DHC’s leverage and is immediately accretive to DHC's normalized funds from operations and cash available for distribution, and the expected pro rata annual distribution represents a 267% immediate increase for DHC shareholders."

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