HUNT VALLEY, MD—Locally-based Omega Healthcare Investors has agreed to buy Chicago-based Aviv REIT in an all-share transaction that will value Aviv at $3 billion.

The combined company, which will be a pure play skilled nursing home REIT, will consist of 874 facilities located in 41 states. Omega Chief Executive Officer Taylor Pickett will lead the new company and Aviv Chairman and CEO Craig Bernfield will join its board.

Under the terms of the agreement, Aviv shareholders will receive 0.90 Omega shares for each share of Aviv common stock they own, or $34.97 of Omega stock for each Aviv share for a premium of approximately 16.2% over Aviv's closing stock price on Thursday.

The combined company, which will be worth $10 billion according to Omega, will have an improved credit profile and lower acquisition costs with an expected pro forma funded debt to total market capitalization ratio of less than 35% and an Adjusted Pro Forma EBITDA to interest coverage ratio greater than 3.5x as of September 30, 2014.

Indeed one of the drivers behind the deal is its increased purchasing power, Pickett says in a prepared statement—an important value creator for shareholders "in the large, highly fragmented SNF industry."

"The combined company will have unrivaled resources to pursue attractive acquisition and development opportunities within its base of existing operator relationships and will also have the human and capital resources to pursue new operator relationships for continued external growth," he says.

The combined companies expect to benefit from approximately $9 million of general and administrative cash savings and additional savings from reduced borrowing costs.

Prior to the acquisition Omega had been working to clear its balance sheets. In September, It paid approximately $34.3 million to retire four mortgage loans guaranteed by the US Department of Housing and Urban Development. The loans had a blended interest rate of 6.39% and the payoff resulted in a $1.6 million gain.

Also in September it sold $250 million of its 4.5% Senior Notes, resulting in gross proceeds of $248 million. Omega used the proceeds to repay some its credit facility.

The larger goal, however, is no doubt the massive consolidation underway in health care real estate.

Health care deals are a huge component of REIT mergers and acquisitions now, a recent SNL Financial report says. To name a few, NorthStar Realty Finance is acquiring Griffin-American Healthcare REIT II and Ventas is acquiring American Realty Capital Healthcare Trust.

Omega itself is no stranger to acquisitions: in 2010 it purchased 40 long-term care facilities from affiliates of CapitalSource for $270 million.