Nation’s Largest Homebuilder to Acquire 75% of
Forestar for $17.75 per share; Forestar Terminates Previous Merger
Agreement with Starwood Capital Group
Positions Forestar to Become a Leading
Publicly-Traded National Land Developer with Significant Growth
Potential
Accelerates D.R. Horton’s Strategy Expanding
Use of Land Developers and Lot Options
D.R. Horton, Inc. (NYSE: DHI) (“D.R. Horton”), America’s
Builder, and Forestar Group Inc. (NYSE: FOR) (“Forestar”) today
announced the execution of a definitive merger agreement under
which D.R. Horton will acquire 75% of the currently outstanding
shares of Forestar for $17.75 per share in cash.
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View the full release here:
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“We are pleased to have reached this agreement with Forestar,”
said Donald R. Horton, Chairman of the Board of D.R. Horton. “The
acquisition of a majority ownership position in Forestar advances
D.R. Horton’s stated strategy by increasing our access to
high-quality optioned land and lot positions and creates strategic
alignment between these companies. Forestar’s shareholders
meaningfully benefit by receiving a superior and immediate cash
premium for their shares, while also having the opportunity to
retain a substantial stake in a company we are committed to growing
into a leading residential land development platform with national
scale.”
“Forestar is pleased to announce this transformational agreement
with D.R. Horton, America’s largest homebuilder. This transaction
is expected to create additional value for shareholders of both
companies, and to enable Forestar to become a leading national land
developer,” said Phillip J. Weber, Chief Executive Officer of
Forestar. “Aligning Forestar’s resources with D.R. Horton’s strong
demand for finished lots, extensive network of markets, land
acquisition and development professionals and land seller and
business relationships is expected to accelerate our growth and
enhance our operating efficiency and returns. By remaining a public
company, Forestar expects to maintain access to capital to support
the increasing scale of the business.”
Strategic Rationale
As the nation’s largest homebuilder, D.R. Horton has tremendous
demand for finished lots and is projected to close approximately
45,000 homes in fiscal year 2017. However, D.R. Horton is committed
to owning no more than a two- to three-year supply of lots and
supplementing its land pipeline through lot purchase agreements
with land developers. This transaction is consistent with its
stated long-term strategy of developing strong relationships with
land developers across the country and growing the optioned portion
of its land and lot position to enhance both operational efficiency
and returns. The strategic agreement with Forestar provides D.R.
Horton a unique platform to accelerate this strategy.
Most land developers lack the scale and access to capital to
consistently supply D.R. Horton with a meaningful portion of lots
across its national footprint. Strategic alignment with D.R.
Horton’s network of markets, experienced team and land seller and
business relationships will rapidly accelerate Forestar’s
growth.
As the controlling shareholder in Forestar, D.R. Horton will
look to guide the strategic direction and drive the operational
execution to maximize the future value potential of Forestar. Over
the longer term as Forestar achieves the goal of becoming a leading
national land developer, D.R. Horton currently intends to gradually
reduce its ownership position in Forestar and increase the public
float of Forestar stock.
Transaction Details
The transaction will be effected through a merger of a newly
formed, wholly-owned subsidiary of D.R. Horton with Forestar (the
“Merger”). The Merger will have a cash election feature in which
Forestar stockholders will have the right to elect, for each share
of common stock held, either to receive $17.75 per share in cash as
merger consideration, or to retain such share of the surviving
entity (the “Forestar Successor”). Cash and stock elections will be
prorated, as appropriate, such that 75% of the shares of Forestar
common stock outstanding before the Merger are converted into the
$17.75 per share cash consideration. Following the Merger, D.R.
Horton will own approximately 75% of the outstanding Forestar
Successor shares, and existing stockholders will own approximately
25% of the outstanding Forestar Successor shares. Forestar will
remain a public company, and its common stock will continue to
trade on the NYSE under the symbol “FOR”.
D.R. Horton has the cash and other immediately available capital
to fund the approximately $560 million cash consideration. The
transaction is expected to be accretive to D.R. Horton’s fiscal
2018 earnings.
Management and Operations
Under the terms of the agreement, Forestar will operate as a
public company led by Donald Tomnitz, former CEO of D.R. Horton, as
Executive Chairman, and members of the current Forestar management
team. Forestar’s headquarters will remain in Austin.
As detailed in the Master Supply Agreement, both companies will
proactively identify land development opportunities to expand
Forestar’s platform in its current markets and across D.R. Horton’s
broad national footprint. D.R. Horton plans to acquire a large
portion of the lots Forestar develops at market prices from newly
identified land acquisition opportunities.
Timeframe to Completion
The transaction is expected to close in the fourth calendar
quarter of 2017 subject to the approval of Forestar shareholders
and other customary closing conditions.
Advisors
Moelis & Company is serving as financial advisor to D.R.
Horton in connection with this transaction, and Gibson, Dunn &
Crutcher LLP is serving as legal counsel. JMP Securities
LLC is acting as financial advisor to Forestar,
and Skadden, Arps, Slate, Meagher & Flom LLP is
serving as legal advisor.
About D.R. Horton, Inc.
D.R. Horton, Inc., America’s Builder, has been the largest
homebuilder by volume in the United States for fifteen consecutive
years. Founded in 1978 in Fort Worth, Texas, D.R. Horton has
operations in 78 markets in 26 states across the United States and
closed 43,075 homes in the twelve-month period ended March 31,
2017. The Company is engaged in the construction and sale of
high-quality homes through its diverse brand portfolio that
includes D.R. Horton, Emerald Homes, Express Homes and Freedom
Homes ranging from $100,000 to over $1,000,000. D.R. Horton also
provides mortgage financing and title services for homebuyers
through its mortgage and title subsidiaries.
About Forestar Group Inc.
Forestar is a residential and mixed-use real estate
development company. At first quarter-end 2017, it owned directly
or through ventures interests in 49 residential and mixed-use
projects comprised of approximately 4,400 acres of real estate
located in 10 states and 14 markets. In addition, it owned
interests in various other assets that have been identified as
non-core that the company is divesting opportunistically over time.
At first quarter-end 2017, the remaining non-core assets
principally include 19,000 acres of timberland and undeveloped land
(including mitigation banking), four multifamily assets and
approximately 20,000 acres of groundwater leases in
central Texas. Forestar operates in three business
segments: real estate, mineral resources and other. Forestar’s
internet address is www.forestargroup.com.
Forward-Looking Statements
Portions of this document may constitute “forward-looking
statements” as defined by the Private Securities Litigation Reform
Act of 1995. Although D.R. Horton and Forestar believe any such
statements are based on reasonable assumptions, there is no
assurance that actual outcomes will not be materially different.
All forward-looking statements are based upon information available
to D.R. Horton and Forestar on the date this release was issued.
Neither D.R. Horton nor Forestar undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Some
forward-looking statements discuss D.R. Horton’s and Forestar’s
plans, strategies and intentions. They use words such as “expects,”
“may,” “will,” “believes,” “should,” “would,” “could,”
“approximately,” “anticipates,” “estimates,” “targets,” “intends,”
“likely,” “projects,” “positioned,” “strategy,” “future,” and
“plans.” In addition, these words may use the positive or negative
or other variations of those terms. Forward-looking statements in
this press release include, but are not limited to, statements
regarding the expected effects on D.R. Horton and Forestar of the
proposed Merger, and Master Supply Agreement, the anticipated
timing and benefits of the Merger and related transactions,
including future financial and operating results, and D.R. Horton’s
and Forestar’s plans, objectives, expectations and intentions.
Forward-looking statements also include all other statements in
this press release that are not historical facts.
Factors that may cause the actual results to be materially
different from the future results expressed by the forward-looking
statements include, but are not limited to: Forestar’s ability to
obtain requisite approval from its stockholders, D.R. Horton’s and
Forestar’s ability to satisfy the conditions to closing of the
proposed Merger; other risks related to the completion of the
proposed Merger and actions related thereto; there may be a
material adverse change of Forestar or the business of Forestar may
suffer as a result of uncertainty surrounding the transaction; the
transaction may involve unexpected costs, liabilities or delays;
legal proceedings may be initiated related to the transaction;
changes in federal or state laws or regulation may occur; the
cyclical nature of the homebuilding industry and changes in
economic, real estate and other conditions; constriction of the
credit markets, which could limit D.R. Horton’s and Forestar’s
ability to access capital and increase their respective costs of
capital; reductions in the availability of mortgage financing
provided by government agencies, changes in government financing
programs, a decrease in D.R. Horton’s ability to sell mortgage
loans on attractive terms or an increase in mortgage interest
rates; the risks associated with Forestar’s and D.R. Horton’s land
and lot inventory; home warranty and construction defect claims;
the effects of a health and safety incident; the effects of
negative publicity; supply shortages and other risks of acquiring
land, building materials and skilled labor; the impact of an
inflationary, deflationary or higher interest rate environment;
reductions in the availability of performance bonds; increases in
the costs of owning a home; the effects of governmental regulations
and environmental matters on our homebuilding operations; the
effects of governmental regulations on our financial services
operations; our significant debt and our ability to comply with
related debt covenants, restrictions and limitations; competitive
conditions within the homebuilding and financial services
industries; D.R. Horton’s and Forestar’s ability to execute our
growth strategies, acquisitions or investments successfully; the
effects of the loss of key personnel; and information technology
failures and data security breaches. Additional information about
issues that could lead to material changes in performance is
contained in D.R. Horton’s and Forestar’s respective annual reports
on Form 10-K and their respective most recent quarterly reports on
Form 10-Q, all of which are filed with the Securities and Exchange
Commission (the “SEC”). There can be no assurance that the merger
will be completed, or if it is completed, that it will close within
the anticipated time period or that the expected benefits of the
merger will be realized.
Additional Information
In connection with the completion of D.R. Horton’s proposed
transaction with Forestar, Forestar will file a registration
statement with the SEC on Form S-4 that will include a proxy
statement/prospectus to be distributed to Forestar stockholders.
Forestar will mail the proxy statement/prospectus and a proxy card
to each stockholder entitled to vote at the special meeting
relating to the proposed Merger. SECURITY HOLDERS ARE ADVISED TO
READ THE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. The registration
statement, proxy statement/prospectus and other relevant documents
will be available at no cost at the SEC’s website at
http://www.sec.gov. Investors may also obtain Forestar’s SEC
filings in connection with the transaction, free of charge, from
Forestar’s Web site (www.forestargroup.com) under the link
“Investor Relations” and then under the link “Financial and SEC
Reporting” and then under the tab “SEC Filings,” or by directing a
request to Forestar, Charles D. Jehl, Chief Financial Officer.
D.R. Horton, Forestar and their respective directors and certain
of their executive officers may be deemed to be participants in any
solicitation in connection with the proposed Merger. Information
regarding D.R. Horton’s directors and executive officers is
available in D.R. Horton’s proxy statement for the 2017 Annual
Meeting of Stockholders, filed with the SEC on December 9, 2016.
Information regarding Forestar’s directors and executive officers
is available in Forestar’s proxy statement for the 2017 Annual
Meeting of Stockholders, filed with the SEC on March 28, 2017.
These documents can be obtained free of charge from the sources
indicated above. Other information regarding D.R. Horton and
Forestar participants in any proxy solicitation in connection with
the proposed transaction and a description of their direct and
indirect interests, by security holdings or otherwise, will be
contained in the proxy statement/prospectus and other relevant
materials to be filed with the SEC.
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
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version on businesswire.com: http://www.businesswire.com/news/home/20170629005640/en/
D.R. HortonInvestor Relations Contact:Jessica Hansen,
817-390-8195Vice President of Investor
Relationsjlhansen@drhorton.comorMedia Contacts:Sard Verbinnen &
CoLiz Zale, 212-687-8080lzale@sardverb.comorKelly Kimberly,
832-680-5120kkimberly@sardverb.comorForestar GroupInvestor
Relations Contact:Charles D. Jehl, 512-433-5229Chief Financial
Officerchuckjehl@forestargroup.comorMedia Contacts:Kekst and
CompanyJeremy Fielding,
212-521-4858jeremy.fielding@kekst.comorMolly Morse,
212-521-4826molly.morse@kekst.com
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