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Capital Senior Living Axes $35M Buy-Out

DALLAS-Capital Senior Living terminates the bid to buy Hearthstone Senior Living Corp. and replaces it with a new growth plan. It will still hunt for a Texas home-care agency.

By Connie Gore | Updated on February 12, 2008

DALLAS-In a close-out of due diligence, Capital Senior Living Corp. has dropped a $35-million buy-out plan for Hearthstone Senior Living Corp. In turn, the proposed buyer has revised its business plan to focus on expansions and conversions in its portfolio and continue the acquisition hunt for a home-care agency in Texas.

“Our due diligence was thorough and our financial analysis extensive,” James Stroud, chairman of Dallas-based Capital Senior Living, says in this morning’s press release. The company and Hearthstone, headquartered in the Woodlands near Houston, began discussing merger prospects in early 2007, about six months after Hearthstone sold its real estate for $431 million to Nationwide Health Properties Inc. of Newport Beach, CA. It was reported in late December 2007 that due diligence had begun, with the Hearthstone acquisition slated to close in the second quarter.

Had Capital Senior Living proceeded to buy Hearthstone, it would have gained 32 leases of assisted-living facilities, totaling 2,192 units with a resident capacity of about 3,800. The 89%-occupied, 10-state portfolio would have added four new markets for the buyer. Prior to due diligence, the acquisition was projected to increase revenue by 54% to $289.1 million and boost EBITDAR by 75% to $94.4 million. It also promised a blended EBITDAR margin of 32.7% and incremental rent expense of $35.3 million.

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