After acknowledging the receipt of an unsolicited cash bid from D.R. Horton Inc. for 75% of its outstanding common shares, Forestar Group Inc's board said the nonbinding proposal could "reasonably be expected" to result in a superior proposal compared to the merger agreement it had previously signed with Starwood Capital Group.
Forestar said its agreement with Starwood allows it to consider D.R. Horton's proposal and discuss it further, subject to the signing of a confidentiality agreement with the homebuilder.
It said it still remains subject to the Starwood agreement and that its board is not modifying or amending any agreement, nor is the board making any recommendations regarding either proposal.
Starwood had agreed to buy all of Forestar's outstanding common shares for $14.25 per share in cash, while D.R. Horton offered $16.25 per share for 75% of Forestar's common shares, reflecting a 14% premium to the Starwood offer.
Forestar is facing a lawsuit from its shareholders over the Starwood agreement, alleging that the defendants disseminated "a materially misleading" proxy statement regarding the proposed merger.
JMP Securities LLC is serving as financial adviser to Forestar, while Skadden Arps Slate Meagher & Flom LLP is acting as legal adviser.