D.R. Horton makes $520M bid for TX developer Forestar

Dive Brief:

Fort Worth, TX–based D.R. Horton, the country’s largest homebuilder, has put in an offer to acquire residential developer Forestar Group for $520 million, according to the Austin Business Journal. With the deal, worth $16.25 per share in cash, D.R. Horton would buy 75% of Forestar’s outstanding shares and Forestar would remain publicly traded.
Forestar, based in Austin, TX, is considering Horton’s bid alongside another: In April, Starwood Capital Group put in an offer to purchase the developer for $14.25 per share, which Forestar accepted.
D.R. Horton chairman Donald Horton said in a statement that the acquisition will help make Forestar “the country’s leading residential land development company.”

Dive Insight:

D.R. Horton closed 41,652 homes in 2016, a 13.4% increase over 2015 that kept the builder firmly at No. 1 on Builder magazine’s annual ranking of the top 100 U.S. homebuilders. The company reported increases in Q2 2017 revenues, net income, net sales orders and closings from the same period the year before.

The acquisition of Forestar, which has 50 residential and mixed-use projects across 10 U.S. states, would bolster D.R. Horton’s land portfolio at a time when builders are facing higher costs and labor shortages, Reuters reported. Lennar made a similar move with its acquisition of Florida-based builder WCI Communities in February.

Land constraints are a top concern among builders around the country. In a National Association of Home Builders/Wells Fargo Housing Market Index survey earlier this year, 67% of builder respondents said that availability of developed lots would be a challenge in 2017, second only to labor shortages.

If it goes through, the D.R. Horton/Forestar deal will be the latest in a handful of homebuilder and developer mergers and acquisitions activity over the past year, including the builder’s own acquisition of southeast builder Wilson Parker Homes as well as Lennar’s purchase of WCI and AV Homes’ purchase of first-time and move-up builder Savvy Homes, Builder reported, and Century Communities’ $336 million merger with UCP.