Brookdale inks $2.8B Emeritus purchase deal

Acquisition will create company with operations in 330 markets, 10% market share

Brookdale Senior Living is acquiring its largest rival in a deal worth $2.8 billion.

Brentwood-based Brookdale is paying $1.4 billion in stock for Emeritus Corp. and assuming $1.4 billion of its debt in a transaction that's expected to close during the third quarter. The combined company will remain headquartered in Maryland Farms. Brookdale shareholders will own 73 percent of the combined company, which had combined revenues of $4.9 billion in 2013 — 80 percent of which came from private sources — and adjusted EBITDA of $867 million. It will have a national market share of about 10 percent.

On a call with analysts and investors, Brookdale CEO Andy Smith — who will hold that role in the combined organization — said the new Brookdale will be the largest player in its industry "by an order of magnitude." Seattle-based Emeritus runs 500 communities in 45 states and serves 54,000 residents. Brookdale cares for 67,000 people at 649 communities in 36 states. Combined, the companies are in 330 markets around the country.

The number of units owned by the company will expand by two-thirds to 113,000 as part of the transaction. Smith said his team plans to invest in renovating, upgrading and repositioning some Emeritus assets through its program that has historically generated returns of 12 to 15 percent. On top of that, Brookdale's execs see the potential for $100 million of extra revenue each year by rolling out services such as home health and hospice to Emeritus properties. (See chart on the right.)

Emeritus President and CEO Granger Cobb will join Brookdale's board of directors and continue in a consulting role with the company for now. Brookdale President and CFO Mark Ohlendorf will keep those titles with the larger company.

On the conference call, Ohlendorf called the Emeritus acquisition "a very unique opportunity to create a powerful new senior living company."

Shares of Brookdale (Ticker: BKD) were up slightly to $30.10 in after-hours trading Thursday. They have risen about 5 percent over the past three months.