Proxy advisory firm supports merger of Regional Health Properties and Sunlink

An independent proxy advisory firm, Institutional Shareholder Services, has recommended that shareholders of Regional Health Properties (RHP) and Sunlink Health Systems vote in favor of their proposed merger at a special meeting today. The merger between the Georgia-based companies, originally announced in January, was expected to close in the spring but was later rescheduled for the third quarter or this summer.

The merger will involve SunLink Health Systems merging into Regional Health Properties, with SunLink’s shareholders owning approximately 43% of the combined entity, as per a filing with the Securities and Exchange Commission. ISS stated that the strategic rationale behind the merger seems promising, citing pre-tax cost synergies and increased potential for long-term profitability. The positive response from investors since the merger announcement indicates favorable views toward the proposed combination.

Regional Health Properties has emphasized that consolidating the two companies will lead to an overall improvement in their financial position. Currently, RHP generates $41.8 million in annual revenue, while SunLink brings in $30.8 million annually. Together, the combined entity could expect revenues of approximately $72 million per year, as estimated by RHP. The merger would also result in a reduction of net debt from $48.5 million for RHP alone to $42.5 million when combined with SunLink’s net debt.

Furthermore, Regional Health Properties has a shareholder equity of negative $4.2 million, which would increase to around $10 million in the combined company with SunLink’s positive shareholder equity of $13.4 million. RHP’s portfolio consists of 12 senior living and care properties spread across five states.

SunLink Health Systems’ CEO, Robert M. Thornton Jr., expressed excitement about the anticipated benefits and opportunities that the merger will bring to the respective stockholders of both companies. Upon completion of the all-stock transaction, Brent Morrison, Chairman, and CEO of Regional Health Properties, will assume the role of president and CEO of the combined entity, with Robert M. Thornton Jr. serving as executive vice president for corporate strategy. Mark Stockslager will be the CFO, transitioning from his current role as CFO of SunLink Health Systems.

SunLink Health Systems has also clarified that it doesn’t expect the deficiency notice received from the New York Stock Exchange on July 3 to have any impact on the planned merger. The merger of Regional Health Properties and SunLink Health Systems marks a significant step forward in the healthcare industry, with potential financial benefits for both companies and their shareholders.