CHP Merger |
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Mar. 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CHP Merger | CHP Merger Strategic Merger with CNL Healthcare Properties, Inc. On March 11, 2026, pursuant to a definitive agreement and plan of merger dated November 4, 2025 (the “Merger Agreement”), by and among the Company, SSL Sparti LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Holdco”), SSL Sparti Property Holdings Inc., a Maryland corporation and a wholly owned subsidiary of Holdco (f/k/a Sparti Merger Sub, Inc., “SNDA Merger Sub”), CNL Healthcare Properties, Inc., a Maryland corporation (“CHP”), and CHP Merger Corp., a Maryland corporation and a wholly owned subsidiary of CHP (“CHP Merger Sub”), the Company completed the acquisition of CHP through a series of steps ending with a forward merger of CHP with and into SNDA Merger Sub, with SNDA Merger Sub surviving the merger (the “CHP Merger”). As a result of the CHP Merger, the Company acquired 100% of the outstanding shares of CHP. The transactions contemplated by the Merger Agreement are collectively referred to herein as the “Merger Transactions”. Pursuant to the Merger Agreement, each share of common stock of CHP, par value $0.01, was cancelled and converted into the right to receive (i) $2.32 in cash and 0.1318 shares of common stock of the Company, par value $0.01 (“Sonida Common Stock”), which was determined by dividing (a) $4.58 by (b) the volume weighted average trading price (“VWAP”), of Sonida Common Stock during a measurement period prior to the closing date, subject to a collar of 15% below the transaction reference price for the Sonida Common Stock of $26.74 (the “Transaction Reference Price”) and 30% above the Transaction Reference Price. Since the VWAP during the measurement period was $35.93, the 0.1318 exchange ratio was calculated by dividing $4.58 by $34.76, being the high end of the asymmetrical collar. In connection with the issuance of Sonida Common Stock to the former CHP shareholders and certain equity financing transactions, on February 26, 2026, the Company amended its Amended and Restated Certificate of Incorporation, pursuant to that certain Eighth Certificate of Amendment to the Amended and Restated Certificate of Incorporation, to increase the authorized number of shares of Sonida Common Stock to 100.0 million. Financing of the Merger Transactions On December 29, 2025, the Company amended and restated its revolving credit facility (as further amended on March 5, 2026, the “A&R Credit Agreement”) to, among other things, provide for permanent debt financing (“Permanent Financing”) to fund a portion of the cash consideration necessary for the CHP Merger, which amendments were subject to and conditioned upon the consummation of the CHP Merger. The A&R Credit Agreement increased the available commitments under the revolving credit facility to $405.0 million, extended the maturity thereof to March 10, 2030, reduced the leverage-based pricing matrix to between Secured Overnight Financing Rate (“SOFR”) plus 1.35% margin and SOFR plus 2.00% margin, increased the number of participating lenders under the credit facility, and effected certain other changes (the “Revolving Credit Facility”). In addition, under the A&R Credit Agreement, the Company incurred $525.0 million in new term loans in two equal tranches (the “Term Loan Facility”). The Term Loan Facility is comprised of a three-year tranche that matures on March 10, 2029 and a five-year tranche that matures March 10, 2031. The Term Loan Facility is subject to a leverage-based pricing matrix between SOFR plus 1.30% margin and SOFR plus 1.95% margin. The A&R Credit Agreement has a $320.0 million accordion feature to provide for future liquidity needs of the Company. The Company entered into a SOFR-based interest rate cap (“IRC”) to reduce exposure to the variable interest rate fluctuations associated with the Term Loan Facility. The IRC has a total cost of $0.6 million, an aggregate notional amount of $262.5 million, a 36-month term and a SOFR-based interest rate cap of 4.50%. On March 10, 2026, in order to fund the remaining portion of the cash consideration required for the CHP Merger, the Company incurred $270.0 million in loans under a 364-day senior secured bridge facility (the “Bridge Facility”). The Bridge Facility matures on March 9, 2027 and is subject to a leverage-based pricing matrix between SOFR plus 1.35% margin and SOFR plus 2.00% margin. The Permanent Financing and the Bridge Facility are subject to customary guarantees and security provisions, events of default, corporate covenants and borrowing base availability requirements. The Company entered into a SOFR-based IRC to reduce exposure to the variable interest rate fluctuations associated with the Bridge Facility. The IRC has a total cost of $35 thousand, an aggregate notional amount of $270.0 million, a 12-month term and a SOFR-based interest rate cap of 4.25%. See “Note 8–Debt” and “Note 18–Subsequent Events.” On March 30, 2026, the Company incurred an additional $25.0 million in permanent term loans under the Term Loan Facility, and on March 31, 2026, incurred an additional $25.0 million on the Revolving Credit Facility in order to repay $50.0 million of loans outstanding under the Bridge Facility. As a result of the transaction as of March 31, 2026, the Term Loan Facility increased to $550.0 million in two equal tranches, the Revolving Credit Facility increased to $430.0 million, and the Bridge Facility decreased to $220.0 million. The transaction did not impact the leverage-based pricing matrix or maturity on the three facilities. In connection with the Merger Transactions, the Company has incurred $25.6 million of transaction costs which are included in Transaction, transition and restructuring costs on the condensed consolidated statements of operations for the three months ended March 31, 2026. Equity Financing On November 4, 2025, the Company entered into (i) an investment agreement (the “Conversant Investment Agreement”) with certain affiliates of Conversant Capital LLC (the “Conversant Investors”), pursuant to which the Conversant Investors agreed to fund an aggregate amount of $100.0 million in exchange for the issuance of 3,739,716 shares of Sonida Common Stock in a private placement pursuant to Section 4(a)(2) of the Securities Act at $26.74 per share, immediately prior to the CHP Merger, and (ii) an investment agreement (the “Silk Investment Agreement” and, together with the Conversant Investment Agreement, collectively, the “Investment Agreements”) with Silk (the Conversant Investors and Silk, together, the “Equity Investors”) pursuant to which Silk agreed to fund an aggregate amount of $10.0 million in exchange for the issuance of 373,972 shares of Sonida Common Stock in a private placement at $26.74 per share on substantially the same terms as in the Conversant Investment Agreement (collectively, the “Equity Financing”). On March 11, 2026, the Company issued 4,113,688 shares of Sonida Common Stock to the Equity Investors. Sonida used the proceeds from the Equity Financing pursuant to the Investment Agreements to fund a portion of the cash consideration required for the consummation of the transactions under the Merger Agreement. Under the Investment Agreements, Sonida provided to the Equity Investors representations and warranties substantially similar to those under the Merger Agreement, and the Equity Investors provided to Sonida customary representations and warranties for a private financing of this type. The Equity Investors and Sonida are subject to compliance with customary covenants under the Investment Agreements, subject to the Equity Investors’ consent (not to be unreasonably withheld, conditioned or delayed). The parties have provided mutual indemnities for breach of certain representation and warranties and post-closing covenants capped at the applicable purchase price paid by each of the Equity Investors. Under the Investment Agreements, Sonida was responsible for the Equity Investors’ reasonable and documented legal and other out-of-pocket expenses in connection with the Equity Financing which totaled $1.2 million. In connection with the closing of the Equity Financing, (i) Conversant and certain other entities affiliated with Conversant that are current Company shareholders, Silk and the Company entered into an amended and restated investor rights agreement, and (ii) the Conversant Parties, Silk, PF Investors, LLC and the Company entered into an amended and restated registration rights agreement. Preliminary Purchase Price The consideration for the CHP Merger, which was transferred on March 11, 2026, the closing date of the CHP Merger (“Closing Date”), is as follows (in thousands, except per share data):
Preliminary Purchase Price Allocation For the Company’s real estate acquisitions that are accounted for as business combinations, such as the CHP Merger, the Company allocates the acquisition consideration (excluding acquisition costs) to the assets acquired, liabilities assumed, and noncontrolling interests at fair value as of the acquisition date. Any excess of the consideration transferred relative to the fair value of the net assets acquired is accounted for as goodwill. Acquisition costs related to business combinations are expensed as incurred. The preliminary estimated fair values of the assets acquired and liabilities assumed were based on information that was available as of March 11, 2026, the Closing Date. The fair values were determined using standard valuation methodologies, such as the cost, market, and income approach. These methodologies require various assumptions, including those of a market participant. The following table provides a summary of the preliminary purchase price allocation by major categories of assets acquired and liabilities assumed based on their respective estimated fair values as of March 11, 2026 (in thousands):
As of March 31, 2026, the Company had not finalized the determination of fair value of certain tangible and intangible assets acquired and liabilities assumed including, but not limited to, real estate assets, intangible assets and liabilities, and goodwill. As such, the assessment of fair value of assets acquired and liabilities assumed is preliminary and was based on information that was available at the time the condensed consolidated financial statements were prepared. The finalization of the purchase accounting assessment could result in material changes in the Company’s determination of the fair value of assets acquired and liabilities assumed, which will be recorded as measurement period adjustments in the period in which they are identified, up to one year from the Closing Date. All of the goodwill totaling approximately $64.0 million has been allocated to the Company’s single reportable segment. The recognized goodwill is attributable to expected synergies, cost savings, acquired workforce, and potential economies of scale benefits from senior living property management and community and vendor relationships following the closing of the CHP Merger. None of the goodwill recognized is expected to be deductible for tax purposes. Merger-Related Costs During the three months ended March 31, 2026, the Company incurred approximately $25.6 million of merger-related costs, which primarily related to advisory, legal, accounting, tax, and transition service arrangement costs. These merger-related costs are included in Transaction, transition and restructuring costs on the condensed consolidated statements of operations. Unaudited Pro Forma Financial Information The condensed consolidated statements of operations for the three months ended March 31, 2026 include $22.9 million of revenues and $2.2 million of net loss associated with the results of operations of legacy CHP from March 11, 2026 to March 31, 2026. The following unaudited pro forma information presents a summary of the results of operations for the combined Company, as if the CHP Merger had been consummated on January 1, 2025 (in thousands). The following unaudited pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the unaudited pro forma financial information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses.
The unaudited pro forma financial information above includes nonrecurring significant adjustments made to account for certain costs incurred as if the CHP Merger had been completed on January 1, 2025, including transaction costs and other merger-related costs of $24.9 million which were excluded from the unaudited pro forma financial information for the three months ended March 31, 2026, but included for the three months ended March 31, 2025. The three months ended March 31, 2025 also includes $14.5 million of transaction costs that were recognized during the year ended December 31, 2025.
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