Richard H. “Rick” Miller of Bryan Cave-Powell Goldstein came to his office one day in October to find his schedule completely blank.
Then the phone rang, and for the next month he was busy helping a health care real estate investment trust with an $860 million, three-part securities purchase agreement to acquire more than 140 long-term care facilities.
His client, Omega Healthcare Investors Inc. of Hunt Valley, Md., will purchase the net lease portfolio of CapitalSource Inc., a commercial lender based in Chevy Chase, Md. Omega is slated to pay for the deal with $280 million in cash, $51 million in Omega stock and the assumption or payoff of $529 million in debt.
Miller, whose firm has represented Omega for about two decades, said the deal happened because his client managed its balance sheet conservatively through the recent economic slump and has very little debt, which includes a $200 million revolving line of credit with only $9 million outstanding.
The deal, he said, moved very quickly—so quickly that its genesis caught him off guard. Miller said that on Oct. 14, he closed the case file on governance-related work for the estate of Martin Luther King Jr. prompted by the fight between the civil rights leader's children.
On Oct. 16, he said, “My phone rings. It's Taylor Pickett, CEO of Omega.” Pickett, he said, told him, “'I'm thinking of doing a deal. Do you have time for me?'
“We just launched headlong into this thing,” Miller said. Within 10 days, they'd gotten board approval of a letter of intent for the CapitalSource asset acquisition and were beginning a due diligence review of hundreds of thousands of pages of documents.
Miller said his multi-disciplinary team, which included Eliot W. Robinson, Frank A. Crisafi, Robert C. Lewinson, Joan R. Sasine and Matthew P. D'Amico, handled negotiations, environmental issues and document drafting—including some 90 pages of a single-spaced securities purchase agreement that Miller characterized as “one of those agreements that when you have to revise it, you couldn't revise it in less than six hours.”
CapitalSource was represented by its in-house counsel and outside lawyers at Hogan & Hartson.
The parties announced a final agreement Nov. 17, and Miller said one of the factors helping speed the transaction was that both sides wanted to “keep to the middle of the fairway” and not push the other too much in negotiations.
“That may be a new trend,” he said.
The deal essentially involves Omega buying the stock of the CapitalSource subsidiaries, which are leased to companies that operate them. Michigan lawyer Mark E. Derwent of Doran Derwent in Grand Rapids handled all the leasing work, and Wells Fargo Securities served as adviser to CapitalSource.
Miller said the transaction will involve three closings.
The first, a core portfolio of 40 unencumbered assets, is set to close in late December; the second, which includes 40 assets subject to U.S. Department of Housing and Urban Development regulations and indebtedness, is expected to close in April, once required HUD approvals have been secured. The third part of the deal gives Omega the option to close on an additional 63 facilities any time up until Dec. 31, 2011.
The advantage of the option, Miller said, is that Omega has two years to find the best way to finance that part of the deal. “It's completely reversed the competitive pressure,” he said, explaining that Omega now can get investment bankers to bid for its business instead of scrambling to find financing with a contingency provision hanging over their heads.
Because Omega likely will tap into the capital markets and register shares to complete the three parts of the deal, Miller said his firm's work will be ongoing.
Noting that he billed 110 hours on this deal in a 168-hour week, Miller said, “Thank goodness we got it done before Thanksgiving.”