Zhonghong Zhuoye Group Co Ltd, the Chinese real estate and leisure group which last month bought a stake in SeaWorld Entertainment Inc (SEAS.N), is in talks to acquire Brookdale Senior Living Inc (BKD.N), people familiar with the matter said.
The deal would be by far the biggest acquisition by a Chinese company in the U.S. senior care sector, and a key test of the U.S. government's openness to Chinese investments in key healthcare services industries.
Brookdale has entered exclusive negotiations with Zhonghong after it made an offer of around $3 billion, the sources said on Tuesday. Brookdale had received offers from other parties that valued it substantially below that, the sources added.
Negotiations are ongoing and no deal is certain, the sources said. Brookdale needs to be convinced that a deal with Zhonghong would be approved by the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes corporate acquisitions for potential national security risks, according to the sources.
The sources asked not to be identified because the negotiations are confidential. Brookdale and Zhonghong did not immediately respond to requests for comment.
Brookdale shares jumped as much as 6 percent on the news, and were up 0.5 percent at $14.62 in afternoon trade in New York on Tuesday, giving the company a market capitalisation of $2.7 billion.
Chinese acquisitions of U.S. companies have slowed down this year, amid tighter Chinese controls on getting money out of the country and uncertainty over the stance of U.S. President Donald Trump's administration towards such deals. Trump has criticized Chinese trade practices, but is also looking for Chinese cooperation in tackling North Korea's nuclear ambitions.
There is also little precedent indicating how CFIUS would view a Chinese investment in senior living. Vacancies left in senior positions at several government agencies, almost five months after Trump's inauguration, have caused delays and fuelled uncertainty in the CFIUS review system.
Founded in 1993, Zhonghong is a diversified property investment company. Lat year it acquired Abercrombie & Kent, an international luxury and adventure tour operator.
Last month, Zhonghong completed the acquisition of a 21 percent stake in SeaWorld, a U.S. theme park operator, from private equity firm Blackstone Group LP (BX.N).
Headquartered in Brentwood, Tennessee, Brookdale provides senior living facilities ranging from independent to assistant living, as well as luxury retirement communities.
The company's stock has struggled in the wake of its $2.8 billion acquisition of Emeritus Senior Living in 2014, which proved a drag on financial performance as a result of employee churn and falling occupancy. Brookdale has also came under pressure from activist investor Land and Buildings.
(Reporting by Julie Zhu in Hong Kong and Greg Roumeliotis in New York; Editing by Chizu Nomiyama, Bernard Orr; Additional reporting by Carl O'Donnell and Michael Flaherty in New York)