D.R. Horton, Inc. (NYSE:DHI) has announced the signing of a confidentiality agreement with Forestar Group Inc. (NYSE:FOR), based in Austin, Texas. The agreement will see the two companies share information in addition to discussing D.R. Horton’s proposal to purchase a majority stake in Forestar. D.R. Horton had on June 05, 2017 submitted a proposal to purchase 75% stake in Forestar and offered $16.25 per share.
Initially, Forestar had entered into a merger agreement with Starwood’s affiliates. Starwood has agreed to purchase all outstanding shares of Forestar at a price of $14.25 per share. The whole transaction had equity of $605 million and was approved by the Board of Directors of Forestar and was to be sealed in the third quarter after being approved by Forestar’s shareholders.
However before the transaction could be completed, D.R. Horton proposed an offer before the Board of Directors of Forestar. The offer put forth by D.R. Horton was 14% more than proposed by Starwood. In addition, D.R. Horton would allow Forestar to continue its business and maintain its identity as a public traded company. Shareholders of Forestar would also retain 25% stake after completion of the transaction.
Forestar’s Board of Directors on June 5, 2017 acknowledged receiving D.R. Horton’s offer. The board then agreed to consult with its legal and financial advisors so as to review the new offer. The board, after wide consultations, ratified D.R. Horton’s proposal. In its argument, the board said that D.R. Horton’s proposal will offer a much superior bid as compared to that offered by Starwood in addition to maximizing value for Forestar’s shareholders.
Forestar’s board had agreed to have negotiations with D.R. Horton to come up with the terms for the merger agreement. It is at this point that Forestar’s board proposed that the company should enter into a confidentiality agreement with D.R. Horton.
D.R. Horton specializes in the construction and sale of homes targeting the high-end markets. It is one of the biggest builders of homes in the U.S. Forestar on the other hand specializes in the development of mixed-use and residential houses. The company has stake in 50 mixed-use and residential projects which add up up to around 4,600 acres of real estate spread out in 10 states and 14 markets