425: CHP & SNDA Merger: Proxy Supplement Addresses Lawsuits

CNL Healthcare Properties and Sonida Senior Living filed a proxy statement supplement to address shareholder lawsuits and demand letters concerning their proposed merger, providing additional financial details.

Summary

• CNL Healthcare Properties, Inc. (CHP) and Sonida Senior Living, Inc. (SNDA) entered into a Merger Agreement on November 4, 2025.
• CHP filed a definitive joint proxy statement/prospectus on January 6, 2026, for its annual meeting on March 6, 2026, to vote on the merger.
• Two lawsuits (Williams v. Sonida Senior Living, Inc., et al., No. 650669/2026, and Ballard v. Sonida Senior Living, Inc., et al., No. 650590/2026) have been filed by purported SNDA stockholders, alleging the Definitive Proxy Statement omits material information regarding the proposed transactions.
• SNDA also received demand letters from purported stockholders making similar allegations.
• SNDA believes the allegations are without merit and that the proxy statements comply with applicable law, requiring no further disclosure.
• SNDA and CHP are voluntarily supplementing the Definitive Proxy Statement to mitigate the risk of delays or adverse effects on the merger's consummation and to minimize litigation costs.
• The supplemental disclosures do not change the consideration to be paid to CHP stockholders or the timing of the CHP Annual Meeting.
• The CHP Board continues to recommend voting FOR all proposals related to the merger.
• Supplemental information includes amendments to confidentiality agreements, financial analyses (Selected Public Companies, Discounted Cash Flow) for both CHP and SNDA, and unaudited prospective financial information for standalone SNDA.
• Unaudited prospective financial information for SNDA includes projected Revenue, EBITDA, Adjusted EBITDA, and Unlevered Free Cash Flow for 2025E-2030E, and 10-year utilization of net operating losses (NOLs) for 2026E-2035E.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a slightly negative development due to the emergence of shareholder lawsuits and demand letters, which introduce legal and operational uncertainties. However, the proactive response by SNDA and CHP to provide supplemental disclosures to mitigate delays prevents a more significant negative sentiment.

Positives

• The Boards of both SNDA and CHP continue to recommend the merger proposals, indicating ongoing commitment to the transaction.
• The companies are proactively addressing shareholder concerns and litigation risks by voluntarily supplementing the proxy statement, aiming to mitigate potential delays.
• The supplemental disclosures do not alter the merger consideration for CHP stockholders or the scheduled timing of the CHP Annual Meeting.

Negatives

• Two lawsuits have been filed by SNDA stockholders alleging that the Definitive Proxy Statement omits material information regarding the proposed merger transactions.
• SNDA has received demand letters from purported stockholders alleging disclosure deficiencies in the proxy statements.
• The lawsuits seek an injunction enjoining the special meeting of SNDA stockholders, rescission of the transactions, or damages, introducing uncertainty and potential costs.

Risks

• Risk of litigation action related to the Transactions, including potential injunctions, rescission, or damages.
• Potential for delays or adverse effects on the consummation of the Transactions due to lawsuits and shareholder demands.
• Inability to complete the Transactions due to failure to satisfy all closing conditions, including requisite stockholder approvals or obtaining Equity Financing.
• Diversion of management's time and attention from ordinary course business operations to merger completion and integration matters.
• Economic or other conditions in the markets CHP or SNDA are engaged in could impact the merger.

Future Outlook

The companies anticipate the merger will proceed, with the CHP Board continuing to recommend stockholder approval. The supplemental disclosures are intended to mitigate risks of delay and ensure the consummation of the transactions, which are subject to stockholder approvals and other closing conditions, including Equity Financing.

Management Comments

• SNDA believes that the allegations in the Shareholder Letters and the Actions are without merit, that each of the Preliminary Proxy Statement and the Definitive Proxy Statement complies with applicable law, and that no further disclosure is required.
• The Board continues to recommend that you vote FOR each of the proposals to be voted on at the CHP Annual Meeting described in the Definitive Proxy Statement.

Industry Context

StockSavvy.ai notes that shareholder litigation challenging merger disclosures is a common occurrence in M&A transactions, particularly in sectors like senior living and healthcare properties, which are experiencing consolidation. Companies often choose to provide supplemental disclosures, even while denying the merits of the claims, to avoid costly and time-consuming legal battles that could delay or derail a strategic transaction. The detailed financial projections and comparable company analysis provided in the supplement offer valuable insights into the valuation perspectives underpinning the merger within the broader healthcare REIT market.

Comparison to Industry Standards

• CHP Selected Public Companies (SHOP): American Healthcare REIT, Inc. (CY2026E FFO: 24.4x, AFFO: 27.9x, EBITDA: 21.8x), Ventas, Inc. (CY2026E FFO: 19.7x, AFFO: 24.0x, EBITDA: 19.7x), Welltower Inc. (CY2026E FFO: 30.5x, AFFO: 35.0x, EBITDA: 28.8x).
• CHP Selected Public Companies (NNN): LTC Properties, Inc. (CY2026E FFO: 12.7x, AFFO: 12.4x, EBITDA: 12.7x), National Health Investors, Inc. (CY2026E FFO: 14.8x, AFFO: 14.6x, EBITDA: 14.6x), Sabra Health Care REIT, Inc. (CY2026E FFO: 11.5x, AFFO: 11.6x, EBITDA: 13.4x).
• SNDA Selected Public Companies: American Healthcare REIT, Inc. (CY2026E FFO: 24.4x, AFFO: 27.9x, EBITDA: 21.8x), Brookdale Senior Living Inc. (CY2026E EBITDA: 14.1x), Ventas, Inc. (CY2026E FFO: 19.7x, AFFO: 24.0x, EBITDA: 19.7x), Welltower Inc. (CY2026E FFO: 30.5x, AFFO: 35.0x, EBITDA: 28.8x).
• The overall weighted average low to high CY2026E FFO, AFFO, and EBITDA multiples for CHP selected companies were 17.8x-22.2x, 21.1x-24.9x, and 18.1x-20.1x, respectively.
• The overall low to high CY2026E FFO, AFFO, and EBITDA multiples for SNDA selected companies were 19.7x-30.5x, 24.0x-35.0x, and 14.1x-28.8x, respectively.

Legal Proceedings

• Williams v. Sonida Senior Living, Inc., et al., No. 650669/2026, filed in the Supreme Court of the State of New York.
• Ballard v. Sonida Senior Living, Inc., et al., No. 650590/2026, filed in the Supreme Court of the State of New York.
• Shareholder demand letters alleging disclosure deficiencies in the Preliminary Proxy Statement and/or the Definitive Proxy Statement.

Related Party Transactions

• RBC Capital Markets and/or its affiliates have provided investment banking, commercial banking, and/or financial advisory services to SNDA unrelated to the Transactions and to certain significant stockholders of SNDA (including Conversant) and/or their portfolio companies.
• During the approximate two-year period preceding RBC Capital Markets' opinion, they acted as a bookrunner for a follow-on offering of SNDA Common Stock and as a lender to SNDA and a portfolio company of Conversant under certain credit facilities, receiving aggregate fees of approximately $8 million for these services.

Stakeholder Impact

• Shareholders of SNDA and CHP are directly impacted by the merger vote and the allegations of omitted material information, which could affect their voting decisions and the value of their holdings.
• Company management will experience diversion of time and attention to address litigation and ensure merger completion.
• The merger's consummation, if successful, will impact employees, customers, and suppliers of both companies through integration and strategic changes.

Next Steps

• CHP stockholders will vote on the merger proposals at the CHP Annual Meeting on March 6, 2026.
• SNDA stockholders will hold a special meeting to vote on the Transactions.

Key Dates

Recommendation

The emergence of shareholder lawsuits and demand letters introduces a layer of uncertainty and potential for delays or increased costs to the proposed merger. While management denies the allegations and is taking steps to mitigate risks, the litigation creates an overhang. The underlying strategic rationale for the merger may remain, but the added legal complexity warrants a 'hold' stance until the resolution of these challenges becomes clearer, allowing investors to assess the impact on the deal's terms or timeline.

Keywords

Merger, Acquisition, Healthcare Properties, Senior Living, Proxy Statement, SEC Filing, Litigation, Financial Projections, Corporate Governance, Shareholder Lawsuit