Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of American Realty Capital Healthcare Trust, (UNKNOWN:HCT.DL) (or ARC) are trading about 10% higher today after news broke this morning that the giant real-estate investment trust (REIT) Ventas (NYSE:VTR) would purchase ARC for $2.6 billion in cash and stock.
So what: Ventas made an offer of $11.33 per share of ARC, and ARC shareholders can also elect to swap their shares for 0.1688 shares of Ventas. The deal will only pay out 10% cash at most, with the rest being swapped shares -- at current prices, ARC shareholders will get roughly $10.97 worth of Ventas shares, as the REIT lost nearly 3% of its value on the news. That's still a tiny premium over ARC's current share price of $10.92, but it's nothing to bother arbitraging at the moment.
Now what: ARC has been publicly traded for less than three months now, so it's not as though investors had much time to get used to it as a long-term holding. However, swapping those shares for Ventas shares seems like a losing proposition right now -- Ventas offers a lower dividend yield than ARC and a weak past-year performance, although its five-year chart shows a solid 160% gain with dividends reinvested. You may want to consider taking your gains and finding another high-yielder instead of sticking with Ventas after the deal concludes.