D.R. Horton Inc. submitted a proposal to the board of Forestar Group Inc to acquire 75% of the latter's currently outstanding shares for $16.25 apiece in a roughly $520 million deal.
Affiliates of Starwood Capital Group had signed a definitive merger deal with Forestar in April whereby Starwood would acquire all of Forestar's outstanding shares for $14.25 apiece in a $605 million cash deal.
D.R. Horton said its offer represents a premium of 14% over Starwood's purchase price.
D.R. Horton also said Forestar would remain a public company under the proposed transaction. Donald Tomnitz, who served as CEO of D.R. Horton for more than 15 years, would lead Forestar as the new executive chairman.
The deal would be carried out through the merger of a newly formed and wholly owned D.R. Horton subsidiary with Forestar. The target company's shareholders would have the option to either receive $16.25 per share in cash as merger consideration, or retain such shares in the surviving entity. D.R. Horton would own 75% of the shares of the surviving entity and existing shareholders would own 25%.
The homebuilder said it believes continuing Forestar stockholders will stand to benefit from significant value creation through a strategic relationship with D.R. Horton that would "help Forestar grow organically into the leading residential land development company in the United States, selling developed residential lots to D.R. Horton and other homebuilders."
Moelis & Co. is the financial adviser to D.R. Horton for the proposal, and Gibson Dunn & Crutcher LLP is the legal counsel.