Regional Health Properties and SunLink Health Systems (SSY, Financial) have announced a revised merger agreement whereby SunLink will combine with Regional. The transaction entails the issuance of approximately 1,595,401 shares of Regional's common stock and 1,408,121 shares of a newly-created Series D 8% Cumulative Convertible Redeemable Participating Preferred Shares, valued initially at $12.50 each. Both companies' boards have approved the merger, which still requires shareholder and regulatory approval, along with other standard closing conditions.
Under the proposed terms, for every five SunLink common shares held, shareholders will receive 1.1330 shares of Regional common stock and one share of the new Regional Series D Preferred Stock. Post-merger, SunLink shareholders are expected to own approximately 45.92% of the merged entity. The number of preferred shares is adjustable based on specific financial circumstances, with all stock amounts being subject to further adjustments to accommodate any changes such as stock splits or reclassifications before the merger's completion.
The Series D Preferred Stock will offer a preferential dividend of 8% annually, commencing July 1, 2027, subject to the approval of Regional's board. The shares may be converted into Regional common stock based on specific milestones and conditions post-closing. Additionally, SunLink could issue its shareholders a special dividend not surpassing $1,000,000 under certain conditions before the merger's conclusion.
This merger aims to generate approximately $1.0 million in pre-tax cost synergies by the end of Regional's fiscal 2026. The companies anticipate operational efficiencies following the merger's integration. The transaction is expected to conclude by summer 2025, pending the necessary approvals, and is not anticipated to affect any existing change of control clauses in Regional’s mortgage agreements.
