D.R. Horton and Forestar Announce Merger Agreement to Create a Leading National Land Development Company
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
ARLINGTON, Texas & AUSTIN, Texas--(BUSINESS WIRE)--
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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“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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D.R. Horton
Investor Relations Contact:
Jessica Hansen,
817-390-8195
Vice President of Investor Relations
[email protected]
or
Media
Contacts:
Sard Verbinnen & Co
Liz Zale, 212-687-8080
[email protected]
or
Kelly
Kimberly, 832-680-5120
[email protected]
or
Forestar
Group
Investor Relations Contact:
Charles D. Jehl, 512-433-5229
Chief
Financial Officer
[email protected]
or
Media
Contacts:
Kekst and Company
Jeremy Fielding, 212-521-4858
[email protected]
or
Molly
Morse, 212-521-4826
[email protected]
Source: D.R. Horton
