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Invitation Homes, Starwood Waypoint merging in stock-for-stock deal

Invitation Homes Inc. signed a definitive agreement to combine with fellow single-family rental real estate investment trust Starwood Waypoint Homes in a 100% stock-for-stock merger of equals.

The deal would create an entity with an equity market capitalization of approximately $11 billion and a total enterprise value of $20 billion, based on both companies' closing stock prices Aug. 9. Blackstone Group LP is the majority stockholder of Invitation Homes.

The combined entity will operate under the name Invitation Homes, with Invitation Homes CEO Bryce Blair to remain chairman of the entity and Starwood Waypoint CEO Fred Tuomi to serve as its CEO. The shares of the combined company will continue to trade on the New York Stock Exchange under Invitation Homes' ticker symbol, INVH.

Under the deal terms, each Starwood Waypoint share will be converted into 1.614 Invitation Homes shares, based on a fixed exchange ratio, and the merger is intended to be a tax-free transaction. Invitation Homes stockholders are expected to own roughly 59% of the combined company's stock, and Starwood Waypoint shareholders will own 41%.

The combined company will own and manage a portfolio of roughly 82,000 single-family homes, making it the largest single-family rental company in the U.S.

The board of the combined company will comprise 11 directors, with six appointed by Invitation Homes and five appointed by Starwood Waypoint. Invitation Homes CFO Ernie Freedman and chief investment officer Dallas Tanner will remain in the same roles at the combined company, while Starwood Waypoint COO Charles Young will become COO of the merged entity.

The merged company is expected to generate projected annual run-rate synergies of between $45 million and $50 million, with potential additional upside.

The deal will increase the free float of Invitation Homes' shares and decrease Blackstone's ownership stake in the combined entity to 41% from 70% in the current, stand-alone Invitation Homes.

The expected quarterly dividend is 11 cents per share following the closing of the merger, which is expected by the end of 2017, subject to approval by Starwood Waypoint stockholders and other customary closing conditions. The deal has been unanimously approved by the boards of both companies, and Blackstone has also consented to the deal.

Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC serve as financial advisers and Simpson Thacher & Bartlett LLP is the legal adviser to Invitation Homes.

Starwood Waypoint's financial advisers are Morgan Stanley & Co. LLC and Evercore, with Sidley Austin LLP as legal adviser.