AUSTIN, TX—Forestar Group Inc. said Wednesday evening that it had amended its merger agreement with Starwood Capital Group to increase the merger consideration to $15.50 per share in cash. The amendment comes about two weeks after D.R. Horton Inc. made an unsolicited counter-offer to buy 75% of Forestar's common stock for $16.25 per share.
Forestar said its board continues to view the DHI offer as potentially a “superior proposal” under terms of its merger agreement with Starwood. The original merger agreement, announced April 13, was valued at $14.25 per share in cash, or approximately $605 million.
However, Forestar said Wednesday that its board was continuing to recommend the Starwood proposal, and was not making any recommendations regarding the DHI proposal. The Austin, TX-based company said there were no guarantees that a transaction with either Starwood or DHI would come to pass.
The DHI bid would keep Forestar trading on the New York Stock Exchange, an arrangement that the Fort Worth-based homebuilder said would ensure Forestar's continued access to capital. “We believe that D.R. Horton is uniquely positioned to make Forestar the country's leading residential land development company,” Donald R. Horton, chairman of the board at DHI, said on June 5. “Together, we can grow Forestar into a much more significant and valuable company for all of its stockholders.”
Following a call for changes from shareholders SpringOwl Capital and Cove Street Capital in early 2015, Forestar began reshaping its board with input from the two investors. Later that year, it announced a plan to focus on its core business, and in 2016 sold off more than $480 million of non-core assets in the multifamily, lodging, timberland and energy sectors.
As of this past Sept. 30, the company owned, directly or through joint ventures, interest in 55 residential and mixed-use projects comprised of approximately 7,000 acres of real estate located in 11 states and 15 markets. At the end of last year, the company's remaining non-core assets included over 523,000 net acres of owned mineral assets located mainly in Texas, Louisiana, Georgia and Alabama, which traded for $85.6 million this past February; 19,000 acres of timberland and undeveloped land; four multifamily assets; and approximately 20,000 acres of groundwater leases in central Texas.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
