Item 1.01. Entry into a Definitive Agreement.
Merger Agreement
On August 9, 2017, Invitation Homes Inc., a Maryland corporation (“INVH”), Invitation Homes Operating Partnership LP, a Delaware
limited partnership (“INVH Partnership”), IH Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of INVH (“REIT Merger Sub”), Starwood Waypoint Homes, a Maryland real estate investment trust
(“SFR”), and Starwood Waypoint Homes Partnership, L.P., a Delaware limited partnership (“SFR Partnership”) entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”).
The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, (i) SFR will be
merged with and into REIT Merger Sub, with REIT Merger Sub surviving as a wholly owned subsidiary of INVH (the “REIT Merger”) and (ii) as promptly as practicable after the REIT Merger, SFR Partnership will be merged with and into INVH
Partnership, with INVH Partnership surviving as a wholly owned subsidiary of INVH (the “Partnership Merger,” and, together with the REIT Merger, the “Mergers”). Closing of the Mergers under the Merger Agreement will occur on the
third business day following satisfaction of all closing conditions, and either INVH or SFR may terminate the Merger Agreement if closing has not occurred on or before May 9, 2018 (the “Outside Date”).
Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the REIT Merger, each issued and
outstanding common share of beneficial interest, par value $0.01 per share, of SFR (the “SFR Common Share”) will be converted into the right to receive 1.6140 (the “Exchange Ratio”) newly issued, fully paid and nonassessable
shares of common stock, par value $0.01 per share, of INVH (the “INVH Common Stock”). Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Partnership Merger, which will occur as
promptly as practicable after the REIT Merger, each issued and outstanding unit of SFR Partnership (the “SFR Partnership Units”) will be converted into the right to receive 1.6140 newly issued and fully paid common units,
representing limited partner interests, in INVH Partnership (“INVH Partnership Units”). No fractional shares of INVH Common Stock will be issued in the REIT Merger, and the value of any fractional interests to which a holder would
otherwise be entitled will be paid in cash.
Immediately prior to the effective time of the REIT Merger, each outstanding restricted share
unit and performance share unit of SFR (“SFR RSU”) that vests as a result of the Mergers or the Merger Agreement will automatically be converted into the right to receive INVH Common Stock based on the Exchange Ratio, plus any accrued but
unpaid dividends (if any) and less certain taxes (if any). At the effective time of the REIT Merger, each SFR RSU that does not vest as a result of the Mergers or the Merger Agreement will be automatically assumed by INVH and converted into an
equivalent stock-based incentive award unit with respect to INVH Common Stock and be subject to the same terms and conditions as applicable to such awards.
The REIT Merger is intended to qualify as a reorganization for U.S. federal income tax purposes, and the Partnership Merger is intended to be
treated as a transaction that is generally
tax-free
to the holders of SFR Partnership Units for U.S. federal income tax purposes.
Each of the board of directors of INVH (the “INVH Board”) and the board of trustees of SFR (the “SFR Board”) has
unanimously approved the Merger Agreement and the Mergers. The approval by the stockholders of INVH of the issuance of INVH Common Stock in connection with the REIT Merger and the other transactions contemplated by the Merger Agreement (the
“INVH Stockholder Approval”) has been obtained by written consent of entities under common control of Blackstone Real Estate Partners VII L.P., an investment fund sponsored by The Blackstone Group L.P., and its general partner and certain
affiliated funds and investment vehicles, which collectively own approximately 71% of the outstanding INVH Common Stock (the “INVH Majority Stockholders”). In addition, SFR has agreed to recommend that its shareholders approve the REIT
Merger and the other transactions contemplated by the Merger Agreement by a majority of the outstanding shares of SFR Common Shares (the “SFR Shareholder Approval”).
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The parties to the Merger Agreement have made certain customary representations and warranties in
the Merger Agreement and have agreed to customary covenants, including with respect to the conduct of business prior to the closing and covenants prohibiting both parties and their respective subsidiaries and representatives from soliciting,
providing information, entering into discussions concerning proposals relating to an alternative acquisition transaction (for 15% or more of the equity or assets), or approving any agreement relating to an acquisition proposal or requiring SFR or
INVH to terminate the Merger Agreement, subject to certain limited exceptions. Prior to obtaining the requisite shareholder approval, SFR may change its recommendation or terminate the Merger Agreement (to enter into an agreement with respect to a
superior proposal) only if it has received an unsolicited written acquisition proposal that constitutes a superior proposal and determines in good faith, after consultation with its outside financial and legal advisors, taking into account any
changes to the Merger Agreement proposed in response by INVH, that the superior proposal continues to constitute a superior proposal.
The
completion of the Mergers is subject to customary conditions, including: (i) the approval of the REIT Merger by SFR’s shareholders; (ii) effectiveness of the registration statement that will contain the joint proxy
statement/information statement/prospectus sent to INVH’s stockholders and SFR’s shareholders; (iii) no injunction or law prohibiting the Mergers; (iv) approval for listing on the New York Stock Exchange of the INVH Common Stock
to be issued in the Mergers, subject to official notice of issuance; (v) accuracy of each party’s representations, subject in most cases to materiality or material adverse effect qualifications; (vi) the absence of a material adverse
effect on either INVH or SFR; (vii) material performance and compliance with each party’s covenants; and (viii) the receipt of tax opinions from counsel to INVH and SFR relating to the reorganization and the REIT status of each of
INVH and SFR.
The Merger Agreement may be terminated under certain circumstances, including (i) by either party if the Mergers have
not been consummated on or before the Outside Date; (ii) by either party upon entry of a final and
non-appealable
order prohibiting the transaction; (iii) by either party upon a failure of SFR to
obtain the requisite approval of its shareholders; (iv) by SFR, prior to obtaining the requisite shareholder approval, upon SFR entering into an alternative acquisition agreement with respect to a superior proposal and SFR paying its applicable
termination fee and expense amount; (v) by INVH upon the SFR Board changing its recommendation with respect to the transaction or SFR entering into an alternative acquisition agreement; (vi) by SFR upon the INVH Board changing its
recommendation with respect to the INVH stock issuance or INVH entering into an alternative acquisition agreement; (vii) by either party upon an uncured breach by the other party that would reasonably be expected cause the closing conditions
not to be satisfied and that cannot be cured by the Outside Date; (viii) by SFR if INVH breaches its covenant not to solicit acquisition proposals in any material respects; or (ix) by INVH if SFR breaches its covenant to hold the SFR
shareholder meeting or its covenant not to solicit acquisition proposals in any material respects. In connection with the termination of the Merger Agreement under specified circumstances, INVH may be required to pay to SFR a termination fee of
$230 million and/or pay to SFR an expense amount equal to $25 million, or SFR may be required to pay to INVH a termination fee of $161 million and/or pay to INVH an expense amount equal to $25 million.
The Merger Agreement provides that INVH will take all requisite action prior to the effective time of the REIT Merger to cause the INVH Board
as of the effective time of the REIT Merger to be comprised of (i) Barry S. Sternlicht, Michael D. Fascitelli, Jeffrey E. Kelter, Richard D. Bronson, and Frederick C. Tuomi (the “SFR Designees”) and (ii) Bryce Blair, Jonathan D.
Gray, Robert G. Harper, John B. Rhea, Janice L. Sears, William J. Stein (the “INVH Designees”), with Bryce Blair to be appointed Chairman of the INVH Board and Michael D. Fascitelli to be appointed Chairman of the Investment Committee of
the INVH Board.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The foregoing
description of the Merger Agreement is not complete and is qualified in its entirety by reference to the full text of the Merger Agreement. The Merger Agreement has been attached to provide investors with information regarding its terms and
conditions. It is not intended to provide any other factual information about INVH or SFR. In particular, the assertions embodied in the representations and warranties in the Merger Agreement were made as of a specified date, are modified or
qualified by information in confidential disclosure letters provided by each party to the other in connection with the signing of the Merger Agreement, may be subject to a contractual standard of materiality different from what might be viewed as
material to shareholders, or may have been used for the purpose of allocating risk between the parties. Accordingly, investors should not rely on the representations and warranties in the Merger Agreement as characterizations of the actual state of
facts about or condition of INVH, SFR or any of their respective subsidiaries, affiliates or businesses.
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INVH Amended and Restated Stockholders Agreement
.
On August 9, 2017, in connection with the Merger Agreement, INVH entered into an Amended and Restated Stockholders Agreement (the
“Stockholders Agreement”) with the INVH Majority Stockholders (and with Blackstone Real Estate Advisors L.P. (the “Advisor”) for purposes of the standstill provision only) that will become effective upon the closing of the
Mergers. The Stockholders Agreement sets forth various arrangements and restrictions with respect to the governance of INVH and certain rights of the INVH Majority Stockholders with respect to the INVH Common Stock.
Directors
. The Stockholders Agreement requires INVH to nominate a number of individuals designated by the INVH Majority Stockholders
for election as INVH directors at any meeting of INVH stockholders (each an “INVH Majority Designee”) such that, following the election of any directors and taking into account any director continuing to serve as such without the need
for re-election, the
number of INVH Majority Designees serving as directors of INVH will be equal to: (1) if the INVH Majority Stockholders collectively beneficially own at least 30% of the
outstanding INVH Common Stock, three; (2) if the INVH Majority Stockholders collectively beneficially own at least 20% (but less than 30%) of the outstanding INVH Common Stock, two; (3) if the INVH Majority Stockholders collectively
beneficially owns at least 5% (but less than 20%) of the outstanding INVH Common Stock, one.
Vacancies.
For so long as the
Stockholders Agreement remains in effect, INVH Majority Designees may not be removed without the consent of the INVH Majority Stockholders. In the case of a vacancy created by the removal or resignation of an INVH Majority Designee,
the Stockholders Agreement requires the INVH Board to nominate an individual designated by the INVH Majority Stockholders for election to fill the vacancy. The Stockholders Agreement and the INVH charter and bylaws require that
certain amendments to the INVH charter and bylaws, including any change to the number of INVH directors, will require the consent of the INVH Majority Stockholders.
Standstill.
During the term of the Stockholders Agreement, the Advisor and the INVH Majority Stockholders will be subject to a
customary standstill with respect to equity securities of INVH. In particular, the Advisor and the INVH Majority Stockholders (and certain of their affiliates) must not, without the prior consent of INVH, among other things: (i) acquire, make
any proposal or offer to acquire, or propose or facilitate the acquisition of, directly or indirectly, any additional equity securities of INVH, including securities of INVH redeemable or exercisable into such equity securities; (ii) enter
into, agree to enter into, commence or submit any merger, consolidation, tender offer, exchange offer, business combination or other similar extraordinary transaction involving INVH; (iii) tender into a tender or exchange offer (other than a
tender or exchange offer for all of the outstanding shares of INVH Common Stock whereby all shareholders are offered the same per share consideration) commenced by a third party other than a tender or exchange offer that the INVH Board has
affirmatively publicly recommended to INVH’s stockholders that such stockholders tender into such offer; (iv) (x) make, or in any way participate in, any solicitation of proxies to vote any securities of INVH under any circumstances,
(y) seek to advise or influence any person with respect to the voting of any securities of INVH or the INVH Partnership (other than to vote as recommended by the INVH Board), or (z) grant any proxy with respect to any common stock;
(v) form, join or in any way participate in a group with respect to any of the securities of INVH (other than a group including solely the INVH Majority Stockholders and their affiliates); (vi) disclose any intention, plan or arrangement to
change any of the members of the INVH Board (other than pursuant to the INVH Majority Stockholders’ rights under the Stockholders Agreement), any of the executive officers of INVH, the charter or bylaws of INVH, other than to INVH or the INVH
Board or their representatives; (vii) call, request the calling of, or otherwise seek or submit a written request for the calling of a special meeting of, or initiate any stockholder proposal for the election of any director (other than the
designation to INVH of an INVH Majority Designee) or any other action by, the stockholders of INVH; (viii) seek to influence or control the management of the INVH Board, or the policies, affairs or strategy of INVH or the INVH Partnership;
(ix) publicly disclose any intention, plan or arrangement inconsistent with the foregoing; (x) advise, knowingly assist or knowingly encourage, or enter into any arrangements with, any other persons in connection with any of the foregoing;
or (xi) request INVH to amend or waive any of the foregoing provisions (including this provision).
Voting Agreement
. During
the term of the Stockholders Agreement, the INVH Majority Stockholders agreed to vote their INVH Common Stock in favor of all persons nominated to serve as directors of INVH by the INVH Board (that otherwise complies with the Stockholders
Agreement), except to the extent the INVH Majority Stockholders reasonably determines that the election of any such director would reasonably be expected to cause reputational damage to INVH or its subsidiaries or to the INVH Majority Stockholders
or their affiliates or would otherwise reasonably be expected to be materially detrimental to INVH and its subsidiaries.
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Lock-Up.
The INVH Majority Stockholders will not
transfer (except to affiliates or related investment funds or with respect to certain liens or encumbrances) their shares of INVH Common Stock for a
30-day
period after the effective date of the Stockholders
Agreement.
Term
. The Stockholders Agreement will remain in effect until the earlier of: (i) such time as the INVH Majority
Stockholders are no longer entitled to nominate an INVH Majority Designee pursuant to the Stockholders Agreement and (ii) such time as the INVH Majority Stockholders beneficially own 10% or less of INVH Common Stock and the INVH Majority
Stockholders irrevocably waive their right to designate any INVH Majority Designee under the Stockholders’ Agreement.
The foregoing
description of the Stockholders Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Stockholders Agreement, which is attached as Exhibit 10.1 to this Current Report on Form
8-K
and incorporated herein by reference.
Amended and Restated Limited Partnership Agreement of INVH Partnership
On August 9, 2017, simultaneously with the execution of the Merger Agreement (as described above), INVH entered into an
amended and restated agreement of limited partnership ( the “Partnership Agreement”) of INVH Partnership, by and among INVH, as the special limited partner of the INVH Partnership, and Invitation Homes OP GP LLC (the “General
Partner”), as the sole general partner of INVH Partnership and a wholly owned subsidiary of INVH. The Partnership Agreement is substantially in the form previously filed by INVH as exhibit 10.1 to its Registration Statement on Form
S-11
filed with the Securities and Exchange Commission (the “SEC”) on January 6, 2017, except that the Partnership Agreement was modified from the form, among other thing, (i) to provide for a
distribution to the partners, pro rata in accordance with their ownership interests in the partnership, to meet tax obligations of the partners (calculated at an assumed rate) if distributions otherwise made by the INVH Partnership are less than the
tax obligation amount so calculated and (ii) following the consummation of the Mergers, to exempt Starwood Capital Group Global, L.P. from the fourteen month transfer restriction period applicable to limited partners. The material terms of the
form of Partnership Agreement are described more fully in INVH’s final prospectus filed with the SEC on February 2, 2017 pursuant to Rule 424(b) of the Securities Act of 1933, which description is incorporated herein by reference.
The foregoing description of the Partnership Agreement does not purport to be complete and is subject to, and qualified in its entirety by,
the full text of the Partnership Agreement, which is attached as Exhibit 10.2 to this Current Report on Form
8-K
and incorporated herein by reference.