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Forestar, finally a part of Horton

By on June 29, 2017

D.R. Horton Inc. recently declared that they acquired 75% of Forestar Group Inc. for $17.75 per share in a definitive merger contract.

29 June 2017 – Builder Online

The transaction will occur through a merger of a newly formed, wholly-owned subsidiary of D.R. Horton with Forestar. 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.

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.

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.

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.

In a press release, the company explained its rationale for pursuing the deal. “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.

 

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