Lone Star Funds has agreed to acquire Home Properties Inc in a take-private deal valued at about $7.6 billion. The transaction is expected to be completed during the fourth quarter of this year. BofA Merrill Lynch served as financial advisor to Home Properties while Goldman Sachs.did likewise for Lone Star. Home Properties Inc owns, operates, acquires and repositions apartment communities in major metropolitan suburbs.
ROCHESTER, N.Y., DALLAS and DENVER, June 22, 2015 /PRNewswire/ — Home Properties, Inc. (NYSE: HME) (“Home Properties”, or the “Company”) today announced that it has entered into a definitive agreement (the “Merger Agreement”) to be acquired by an affiliate of Lone Star Funds, in a transaction valued at approximately $7.6 billion, including the assumption of existing debt. Upon completion of the transaction, Home Properties will become a privately held company.
Under the terms of the Merger Agreement, Lone Star Funds will acquire all of the outstanding common stock of Home Properties for $75.23 per share in an all-cash transaction (the “Home Properties Merger”). The offer price represents a premium of approximately 9% over Home Properties’ unaffected closing stock price on April 24, 2015, the last trading day prior to media reports on a potential transaction, and a premium of approximately 11% over the average closing price of Home Properties’ common stock for the 60 days ended April 24, 2015.
“The Home Properties team has built a great company, as reflected by our strong platform, unique assets, and differentiated business strategy,” said Edward J. Pettinella, President and Chief Executive Officer of Home Properties. “We believe this transaction with Lone Star Funds provides our stockholders with compelling value for their investment, consistent with our long-term strategy.”
Hugh J. Ward III, Co-Head of Real Estate Investments at Lone Star Funds, added, “We are pleased to enter into an agreement to acquire Home Properties and look forward to working with their talented team to complete this transaction and integrate the Company’s portfolio into Lone Star Funds’ existing multifamily portfolio. This is Lone Star Funds’ second large, recent apartment purchase following the 2014 acquisition of a 64 property, 20,439 unit portfolio, and is consistent with our strategy of buying primarily Class B apartments, including workforce housing, located in in-fill markets with strong underlying fundamentals.”
Transaction with UDR, Inc.
Concurrently with the execution of the Merger Agreement, Home Properties has entered into an agreement to contribute a portfolio of up to six properties containing as many as 3,246 units to UDR, Inc. (NYSE: UDR) (“UDR”), a $13 billion, leading multifamily real estate investment trust with an investment grade rating, in exchange for a combination of cash and newly issued units (the “UDR DownREIT Units”) of a newly formed subsidiary of UDR (“UDR DownREIT”). In connection with this transaction, existing holders of partnership units (“the Home Properties OP Units”) of Home Properties, L.P. (“Home Properties OP”) will have the opportunity to elect to exchange their Home Properties OP Units for 2.15 newly issued UDR DownREIT Units for each Home Properties OP Unit held, plus $3.01 in cash from Lone Star Funds.
Unitholders who elect to receive UDR DownREIT Units in the OP Merger will also receive new tax protection for a period of 10 years from the closing date, regardless of the current tax protection status of their Home Properties OP Units.
Prior to the Home Properties Merger and pursuant to the Merger Agreement, Lone Star Funds will acquire all of the Home Properties OP Units that are not owned by Home Properties and have not been exchanged as described above pursuant to a merger of Home Properties OP with a wholly owned subsidiary of Lone Star Funds (the “OP Merger”). In connection with the OP Merger, holders of Home Properties OP Units who have not exchanged their Home Properties OP Units as described above will receive $75.23 per unit in cash upon the closing of the OP Merger.
“We appreciate Home Properties and Lone Star Funds reaching out to create an opportunity for UDR to offer the Home Properties OP Unitholders an alternative that will allow them to continue to participate in the strong multifamily space and continued growth in UDR,” said Tom Toomey, President and Chief Executive Officer of UDR.
Approvals, Anticipated Closing
The Board of Directors of Home Properties has unanimously approved the merger agreement and has recommended approval of the Home Properties Merger by the Home Properties stockholders and of the Home Properties OP Merger by the Home Properties OP unitholders.
The transaction is expected to close during the fourth quarter of 2015, subject to the approval of the Home Properties Merger by the Home Properties stockholders and the approval of the Home Properties OP Merger by the Home Properties OP unitholders.
Lone Star Funds has received $6.1 billion of fully committed financing from Goldman, Sachs & Co., and the transactions are not subject to a financing condition. Each of the transactions is subject to certain customary closing conditions.
Go Shop Provision
The definitive agreement contains a “go shop” provision under which Home Properties may solicit alternative proposals from third parties during the next 30 calendar days on customary terms and conditions for transactions of this nature. The Home Properties Board, with the assistance of its advisors, has the right to actively solicit acquisition proposals during this period. There can be no assurances that this process will result in any alternative transaction.
BofA Merrill Lynch acted as financial advisor to Home Properties. BofA Merrill Lynch and Houlihan Lokey provided fairness opinions to the Home Properties Board of Directors in connection with the transaction. Goldman, Sachs & Co. acted as exclusive financial advisor to Lone Star. Hogan Lovells US LLP acted as legal advisor to Home Properties. Gibson, Dunn & Crutcher LLP acted as corporate legal advisor, Hunton & Williams LLP acted as real estate legal advisor, and Skadden, Arps, Slate, Meagher & Flom LLP acted as tax legal advisors to Lone Star Funds. Sidley Austin LLP acted as legal advisor to BofA Merrill Lynch, and Cleary Gottlieb Steen & Hamilton LLP acted as legal advisor to Goldman, Sachs & Co.
About Home Properties
Home Properties is a publicly traded multifamily real estate investment trust that owns, operates, acquires and repositions apartment communities in suburbs of major metropolitan areas, primarily along the East Coast of the United States. An S&P 400 Company, Home Properties owns and operates 121 communities containing 41,917 apartment units. For more information, please visit the Company’s website at www.homeproperties.com.
About Lone Star Funds
Lone Star Funds is a global private equity firm that invests in real estate, equity, credit, and other financial assets. Since the establishment of its first fund in 1995, Lone Star Funds has organized fifteen private equity funds with aggregate capital commitments totaling approximately $60 billion. The Funds are advised by Lone Star Global Acquisitions, Ltd. (LSGA), an investment adviser registered with the U.S. Securities and Exchange Commission. LSGA and its global subsidiaries advise the Funds from offices in North America, Western Europe and East Asia.
UDR, Inc. (NYSE: UDR), an S&P 400 company, is a leading multifamily real estate investment trust with a demonstrated performance history of delivering superior and dependable returns by successfully managing, buying, selling, developing and redeveloping attractive real estate properties in targeted U.S. markets. As of March 31, 2015, UDR owned or had an ownership position in 48,086 apartment homes including 1,434 homes under development. For 43 years, UDR has delivered long-term value to stockholders, the best standard of service to residents and the highest quality experience for associates. Additional information can be found on the Company’s website at www.udr.com.