The acquisition is seen as a positive for DHI by analysts at Mizuho Securities USA. Among other considerations, it better positions the homebuilder to achieve a “land-light” model, managing director Haendel St. Juste wrote in a note to clients Thursday.

“While DHI will initially have to consolidate financial results given their 75% ownership stake, over time the company would like to reduce ownership and we believe eventually have ownership below the point in which financial statement consolidation is necessary,” wrote St. Juste. “The industry is moving towards a land-light model and we believe DHI is taking a great step in this direction with the merger announcement.”

AUSTIN, TX—Forestar Group's merger with Starwood Capital Group is off, as the land development company has decided to go instead with the revised D.R. Horton Inc. (DHI) offer to acquire 75% of its stock for $17.75 per share, or approximately $560 million. Starwood Capital and Forestar initially announced a merger agreement this past April, in which Starwood would have taken Forestar private for $16 per share. DHI made its first, unsolicited bid for Forestar earlier this month, and upped the ante this past Friday.

“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,” says Forestar CEO Phillip J. Weber. “By remaining a public company, Forestar expects to maintain access to capital to support the increasing scale of the business.”

After the deal closes, Forestar will continue trading on the New York Stock Exchange under the FOR symbol. It will be led by Donald Tomnitz, former CEO of DHI, as executive chairman, and members of the current Forestar management team, who will continue to be headquartered in Austin.

As Forestar's controlling shareholder, DHI will look to guide the company's strategic direction and drive operational execution to maximize its future value potential. DHI plans to acquire a large portion of the lots Forestar develops at market prices from newly identified land acquisition opportunities. Longer term, DHI intends to gradually reduce its majority stake as Forestar becomes a leading national land developer.

The acquisition is seen as a positive for DHI by analysts at Mizuho Securities USA. Among other considerations, it better positions the homebuilder to achieve a “land-light” model, managing director Haendel St. Juste wrote in a note to clients Thursday.

“While DHI will initially have to consolidate financial results given their 75% ownership stake, over time the company would like to reduce ownership and we believe eventually have ownership below the point in which financial statement consolidation is necessary,” wrote St. Juste. “The industry is moving towards a land-light model and we believe DHI is taking a great step in this direction with the merger announcement.”