Shares of Healthcare Realty (HR), a real estate investment trust (REIT) that specializes in owning outpatient healthcare properties, rose as much as 11% on May 3. The big news driving that advance came out of The Wall Street Journal, which suggested that Healthcare Realty could be "in play."
To set the stage here, Healthcare Realty is currently planning to merge with Healthcare Trust of America (HTA) in a deal valued at roughly $18 billion when it was first announced. That agreement was spurred by activist investor Elliot Management, which took a position in Healthcare Trust of America and then pushed the REIT to sell itself. Healthcare Realty and Healthcare Trust of America have been working steadily toward the consummation of the resulting deal, including the May 2 announcement of progress on selling some assets prior to the close of the merger transaction.
But there was more going on in the background here than meets the eye, with Healthcare Realty receiving a buyout offer from diversified industry giant Welltower (WELL 1.81%) at around the same time it had agreed to a deal with Healthcare Trust of America. Welltower's offer was rejected at the time, but an article in The Wall Street Journal on May 3 suggests that Welltower is still interested in Healthcare Realty.
Notably, Welltower would be willing to pay the breakup fee in the Healthcare Realty/Healthcare Trust of America deal to get something done. That suggests that Healthcare Realty, despite an agreed-upon deal, is still in play. Investors got excited and bid the REIT's stock higher. On the flip side, Healthcare Trust of America's stock declined, on the fear that a busted deal will send it back to the merger/sale drawing board.
It's usually not a good idea to buy a stock based on rumors. And acquisitions can get complicated, even when they are agreed upon, noting Healthcare Realty and Healthcare Trust of America's above asset sales and the still existing need to get shareholder approval for their deal.
While this drama looks like it's getting more and more exciting by the day, most long-term investors should probably stay on the sidelines. There's really no telling what is going to happen from here, and there's no guarantee that it would lead to an even higher price for Healthcare Realty.