Regional Health Properties, Inc. (RHE) and SunLink Health Systems Announce Merger Agreement

Regional Health Properties, Inc. (NYSE: RHE) and SunLink Health Systems, Inc. (NYSE: SSY) have jointly announced the signing of a definitive agreement for a strategic merger that will combine both companies into a single entity. The merger, valued at approximately $1.4 billion, is set to create a stronger, more diversified healthcare property company with a focus on senior living and healthcare services.

Merger Details and Structure

Under the terms of the agreement, SunLink will merge with Regional, with SunLink shareholders receiving 1,410,000 shares of Regional common stock and 1,410,000 shares of Regional’s newly-authorized Series D 8% Cumulative Convertible Redeemable Preferred Stock. The Series D preferred stock will carry a liquidation preference of $10 per share and an 8% annual dividend rate, subject to adjustments.

For every five shares of SunLink common stock, shareholders will receive one share of Regional common stock and, depending on the merger terms, one share of the Series D Preferred Stock. Based on the current number of outstanding shares for both companies, approximately 1.4 million shares of each stock type will be issued.

The transaction has received unanimous approval from both companies' boards of directors and is expected to close in the spring of 2025, subject to shareholder approval, regulatory clearance, and the satisfaction of customary closing conditions. Upon completion, SunLink’s shareholders will own roughly 43% of the combined entity.

Leadership and Governance Post-Merger

The newly-formed company will be led by Regional’s current President and CEO, Brent S. Morrison, who will continue in his role at the helm of the combined entity. Robert M. Thornton, Jr., SunLink’s President and CEO, will take on the position of Executive Vice President of Corporate Strategy, contributing to the company’s long-term growth trajectory. Mark Stockslager, currently the CFO of SunLink, will serve as the CFO of the combined organization.

The board of directors for the merged company will include six members, with leadership from both companies. C. Christian Winkle, former CEO of Sunrise Senior Living and MedQuest, will join the board alongside Scott Kellman, who previously served as CEO of American Eagle Lifecare and held senior leadership roles at major healthcare real estate firms.

Series D Preferred Stock: Key Features and Implications

A standout feature of the merger is the creation of the Series D Preferred Stock. This new class of stock will rank junior to Regional’s existing Series B Cumulative Redeemable Preferred Shares. Shareholders of the Series D stock will be entitled to a cumulative 8% dividend per annum, starting in 2027, contingent upon board approval and the availability of funds. Each three shares of Series D Preferred Stock will be convertible into one share of Regional common stock, either at the holder's discretion or mandatorily under certain conditions.

SunLink’s Special Dividend Opportunity

In a notable move, SunLink has also proposed the potential payment of a one-time, special dividend to its shareholders following the merger’s approval, pending the availability of cash and expected requirements for the closing.

A Stronger Future for the Combined Company

The combined company will be headquartered in Atlanta, Georgia, and is poised to strengthen its position in the healthcare real estate sector, with a particular emphasis on senior housing and long-term care facilities. By merging, the two companies expect to benefit from greater financial scale, improved access to capital, and enhanced operational efficiencies.

The merger represents a significant step in the consolidation of the healthcare real estate market, aligning two established players with complementary strengths. Regional Health Properties and SunLink are confident that the combination will create long-term value for their shareholders, employees, and the communities they serve.

As the merger process moves forward, both companies are committed to ensuring a smooth transition, while strategically positioning the combined entity for future growth and success in the healthcare industry.

Conclusion

The announcement of this merger marks a pivotal moment for both Regional Health Properties and SunLink Health Systems. If the deal is approved, the combined company will create a robust platform for future expansion in the healthcare real estate sector, with a leadership team designed to guide it through the evolving landscape of senior living and healthcare services.