Sun Healthcare Announces REIT Spin-Off: Sum of Parts Worth More Than Whole?

Includes: SBRA, SUNH
by: John Clark

Sun Healthcare (NASDAQ:SUNH) has reported that if all goes as expected at the shareholder meeting on November 4, they are going to break their company into two parts by means of a stock spin-off. When it is all done there will be two publicly traded companies: Sun Healthcare which will own the operating assets and Sabra which will own the real estate.

The Sun Healthcare company announcement states that Sun Healthcare shareholders will receive all of the the shares of the wholly owned subsidiary, SHG Inc., and then SunHealthcare will merge into its wholly owned subsidiary Sabra Healthcare REIT, Inc.

When it is all done if you are a shareholder in the current Sun Healthcare, you will own the operating assets portion of the current company which will be called the Sun Healthcare Group (SUNH) and you will also own Sabra REIT (NASDAQ:SBRA) which will own the real estate assets portion of the current company.

If the company is correct that the market is not recognizing the true value of the company because it is a REIT and a healthcare services provider all rolled into one, then this should result in the total market value of the two parts increasing. Are they correct? Eventually that question will be answered on your quote screen.

Disclosure: I do not own shares in SUNH. I have no financial relationship with the company.