American Homes 4 Rent And American Residential Properties To Merge

Two of the largest players in the single-family rental (SFR) market, American Homes 4 Rent and American Residential Properties Inc., are merging.

As per the deal, which is subject to final approval by shareholders, American Homes 4 Rent is acquiring American Residential via an all-stock transaction and by paying off its debts. The total transaction value is about $1.5 billion, the companies say in a press release.

Specifically, American Homes 4 Rent will issue approximately 38 million common shares and assume or repay a total of approximately $800 million of American Residential Properties' debt. The merger is expected to close in the first half of 2016.

David Singelyn, CEO of American Homes 4 Rent, says the merger will result in ‘the largest publicly-traded owner and operator of single-family rental homes’ in the U.S.

‘American Residential Properties has a high quality portfolio of homes which fit strategically in our markets, offering significant opportunities to capture further operating efficiencies on the combined platform,’ Singelyn says in the release. ‘Moving ahead, we look forward to creating additional value for the shareholders of the combined company while strengthening our position as a premier company in the single-family rental sector.’

Stephen G. Schmitz, chairman and CEO of American Residential Properties, adds that the merger ‘provides American Residential Properties stockholders with a premium for their shares and the opportunity to benefit from participation in the upside potential of an efficient, larger platform that is well positioned in high growth markets and that will benefit from operating synergies.’

The release mentions that the companies will be able to see significant operating efficiencies through the merger, as they both have significant overlap in terms of the regions they serve and the services they provide.

As per the agreement, at closing, each share of American Residential Properties' common stock and each limited partnership unit in its operating partnership will be exchanged for 1.135 common shares or limited partnership units of American Homes 4 Rent, representing a current value per share/unit of American Residential Properties of $19.01, based on American Homes 4 Rent closing price on Dec. 2.

This is a 19.8% premium over the volume weighted average closing price of American Residential Properties' common stock over the 20 trading days ended on Dec. 2 and an 8.7% premium over American Residential Properties' closing price on Dec. 2.

The exchange ratio is not subject to adjustment. Upon closing, American Residential Properties stock and unit holders will own approximately 12.6% of the outstanding common shares and units of the combined company.

In addition, one of the current directors at American Residential Properties will be selected to join the board of American Homes 4 Rent.

The combined company is expected to own more than 47,000 homes in 22 states and to have an equity market capitalization of $5.5 billion, based on American Homes 4 Rent's closing price on Dec. 2, and an aggregate real estate cost basis of over $8 billion, according to the release.


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