Capital Senior Living to buy ILM Senior Living I, II.

Dallas-based Capital Senior Living Corporation has entered into merger agreements with ILM Senior Living Inc. I and II for a combined transaction value of about $170 million. Taken together, ILM I and II will add about 13 communities totaling 2,110 units to Capital's current portfolio of 19 communities totaling 2,700 units.

Under the terms of the deal, Capital will pay about 65 percent, or $110.5 million, in cash and 35 percent in 8 percent convertible trust preferred securities with a liquidation value of about $59.5 million.

Following the merger announcement Jeffries & Company Inc. reiterated its buy rating on the stock, stating: "Not only does this transaction allow Capital to significantly increase its number of owned communities from 19 to 32 (68 percent increase), but it has limited integration risk as Capital has managed the 13 properties since 1996. By effectively adding 2,100 units of stabilized capacity to Capital's portfolio--a 78 percent unit increase--this deal will significantly improve 2000 EPS and operating cashflow."

The Jeffries report also noted that Capital's balance sheet would be strengthened with the addition of the ILM communities. Its debt-to-capitalization ratio, for example, would be 38 percent (the industry average is 53 percent), enabling it to acquire more properties.

In addition, both ILM and Capital have a strong independent living focus. ILM communities are about 84 percent independent living and 16 percent assisted living, and Capital communities are roughly 82 percent independent living and 18 percent assisted living.