D.R. Horton Inc. has won its bidding war for Austin-based real estate developer Forestar Group Inc.
The Arlington-based homebuilder announced June 29 it has agreed to a merger agreement under which D.R. Horton will acquire 75 percent of Forestar for $17.7 5 per share in cash. The deal is valued at $560 million.
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.
For D.R. Horton, the merger is expected to increase the company’s access to land and lots to build their homes. Both companies will identify land development opportunities to expand Forestar’s platform in its current markets and across D.R. Horton’s 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.
“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.”
The transaction is expected to close in the fourth quarter of 2017 subject to the approval of Forestar shareholders and other customary closing conditions.
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.
“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, CEO 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.”