Extendicare to acquire nine long-term care homes in Canada from Revera

Extendicare is expanding its presence in Canada’s senior care sector with a $60.3 million acquisition of nine long-term care homes from Revera, a move that will increase its operational capacity and revenue.

In a strategic acquisition announced on November 28, 2024, Extendicare Inc. agreed to purchase nine Class C long-term care homes located in Ontario and Manitoba, as well as a parcel of vacant land in Ontario, from Revera Inc. This deal marks a significant step in Extendicare’s growth plan as it seeks to solidify its position in the competitive senior care market. The acquisition is expected to add 1,396 beds across several facilities, including both funded long-term care and private-pay retirement beds.

Key financial and operational impacts of the acquisition

The deal is expected to generate an estimated C$124 million in annualized revenue and C$13 million in operating income for Extendicare. This comes as part of the company’s broader plan to modernize and expand its portfolio, with a focus on ensuring the quality of care for residents in Ontario and Manitoba. The company’s President and CEO, Dr. Michael Guerriere, explained that the acquisition adds significant value through its redevelopment pipeline, giving Extendicare control over the future of these homes. While the company has traditionally avoided purchasing older Class C homes, this deal was considered a rare and strategically beneficial opportunity.

Extendicare anticipates that the net operating income from the newly acquired homes will outweigh the loss of management fees from its existing agreements with Revera. Furthermore, the company plans to redevelop several of the acquired properties, replacing old long-term care beds with new, modern facilities. Notably, Extendicare is also exploring the possibility of selling seven operational retirement homes once the redevelopment process is completed, which could further offset the purchase price.

Expanding reach and improving care standards

The acquisition will bring Extendicare’s portfolio to 61 long-term care homes, adding approximately 1,100 beds to the company’s redevelopment pipeline. The newly acquired homes will help extend Extendicare’s reach in Ontario and Manitoba, where demand for senior care services is growing due to an aging population. Extendicare’s strategy also includes continuing its commitment to quality care, as the company has made clear that there will be no job losses following the transaction and that the facilities will continue to operate as they currently do under Extendicare’s management.

The acquisition includes a mix of facilities, such as the 250-bed Carlingview Manor in Ottawa, which is in the process of redevelopment as part of a joint venture with Axium. These upgrades are expected to make the homes more modern and capable of accommodating future residents more comfortably. Additionally, Extendicare emphasized that there will be no disruptions to the lives of current residents or staff, as the transition will be managed smoothly.

Expected impact on financial performance and future growth

On a combined pro forma basis, the deal is projected to add approximately C$109.3 million in consolidated revenue and C$6.8 million in net operating income. The transaction is expected to be funded using Extendicare’s existing cash reserves and credit facilities. While the acquisition will result in a reduction of management fees from the homes being transferred, the overall financial outlook remains positive. The impact on adjusted funds from operations (AFFO) is estimated to be an increase of approximately C$1.4 million, or C$0.02 per basic share.

Dr. Guerriere further noted that the acquisition and the associated redevelopment projects could potentially recover most of the purchase price over time, making it a financially sound move for Extendicare.

Regulatory approvals and timeline

The acquisition is contingent upon regulatory approvals from various authorities, including the Ontario Ministry of Long-Term Care, the Ontario Retirement Home Regulatory Authority, and Manitoba Health. The transaction is expected to close in mid-2025, pending these approvals. Once completed, the transaction will also involve the termination of existing management agreements between Extendicare and Revera.

Legal and financial advisory for the deal was provided by Torys LLP and Stormont Partners for Extendicare, and by Goodmans LLP for Revera.